Kyrgyzstan

Monthly Price Monitoring for Food Security in the Kyrgyz Republic, Issue # 51 | 11 March 2022 [EN/RU]

Attachments

Situation Update

The events in Ukraine, which began on 24 February 2022, and its potential impact on the Russian economy, have already plunged global food and energy markets into turmoil, pushing food prices even higher. For countries dependent on Russia for food imports like the Kyrgyz Republic, the spill-over effects could be severe. In addition, in less than a month, by 11 March 2022, the Kyrgyz Som depreciated by 19 percent, from almost 85 KGS to around 103 KGS, against the US Dollar. The poorest households, who already spend 65 percent of their income on food, will be the most affected, with their food basket now costing significantly more.

Despite the challenge to the Kyrgyz economy to recover from the effects of the COVID-19 pandemic, some improvements were observed in early 2022. In January – February 2022, monthly Global Domestic Product (GDP) increased by 2 percent, compared to the previous year, adding a net 90 billion Kyrgyz Soms (USD 860 million) to the economy. This increase was predominantly driven by improvements in the service sector. Growth projections for the economy remained positive for 2022, ranging from 5 percent (by ADB) to over 6 percent (Ministry of Economy and Commerce), although these were made before the Ukraine crisis.

Increasing geopolitical risks in the world and the region, are already beginning to negatively affect the recovery in the Kyrgyz Republic, most notably seen in rising consumer prices. In January – February 2022, the Consumer Price Index (CPI) increased by 11 percent for all goods and services and by 12 percent for staple foods, as compared to January – February 2021. It is worth noting that the Government imported key food commodities last year in a bid to stabilize prices, which helped prevent a further deterioration of food prices (wheat, vegetable oil and sugar were purchased for a cumulative sum of KGS 1.8 billion or USD 21.2 million). Due to the events in Ukraine and the related destabilization of global and regional markets, imports could be potentially harder to undertake this year. The CPI for fuel and lubricants is estimated to have increased by 68 percent, leading to an increase of transportation costs, which in turn has affected all other prices. The abnormally high temperatures last summer and the lack of irrigation water led to lower yields across multiple key crops: wheat (-42 percent) barley (-46 percent), oil crops (-25.4 percent), sugar beet (-18 percent) and melons (-14 percent).

As of 10 March 2022, the Russian Federation suspended grain and sugar exports to Eurasian Economic Union (EAEU) countries until 31 August 2022. While the Kyrgyz Republic produced almost 363,000 tons of its own wheat in 2021, it also imported almost 125,000 tons (or 34 percent of total food produced) from the Russian Federation. The Government has prepared a decree for the Cabinet Ministers on the introduction of a temporary ban starting from 15 February until 15 August 2022 on the export of wheat, wheat flour, sugar, vegetable oil, eggs and feed crops from the Kyrgyz Republic to other countries outside the EAEU to ensure the food security of the country, prevent critical shortages of food and promptly respond to internal and external threats to the food market.
The following section discusses average prices for the four weeks from 11 February to 11 March 2022, in comparison to the previous four weeks in 2022, the monthly average in February 2020 (before the COVID-19 outbreak began in the country) and the annual average of March 2021.

• Wheat: During the current reporting period (11 February to 11 March 2022), the national retail price of wheat increased by 1 percent, with an average price of almost 31 KGS/kg. As of 11 March 2022, the highest price for wheat was observed in Batken province (33 KGS/kg) and the lowest price in Talas, Naryn and Yssyk-Kul provinces (27 KGS/ kg). Prices were 27 percent and 61 percent higher, compared to March 2021 and February 2020 respectively, and continued to be higher than normal annual price fluctuations (within the benchmark of 15 percent).

• Oil (Cooking): The national retail price of vegetable oil decreased by 1 percent in comparison to the previous month, leading to an average price of almost 176 KGS/L. As of 11 March 2022, the highest price was in Naryn province (189 KGS/L) and the lowest price was in Talas province (169 KGS/L). The prices were 8 percent higher compared to March 2021 and 84 percent higher compared to February 2020, which represents an increase above normal annual price fluctuations. The Kyrgyz Republic has a high import dependency on vegetable oil due to its low internal production and its low capacity for processing oil seeds.

Global wheat and oil exporters: It is important to note that the Russian Federation and Ukraine account for 29 percent of global wheat exports and 80 percent of sunflower oil exports, and the conflict and related supply chain disruptions have pushed up global food prices.

• Sugar: The national retail price of sugar increased by 2 percent, with an average price of 72 KGS/kg. As of 11 March 2022, the highest prices were observed in Jalal-Abad, Batken and Naryn provinces (78 KGS/kg), while the lowest prices were in Yssyk-Kul province (73 KGS/kg). The price of sugar was 12 percent and 76 percent higher, compared to March 2021 and February 2020 levels, which represents a significant increase above normal annual price fluctuations. The international sugar market is characterised by production shortfalls in some major producing countries for a third consecutive year, resulting in a tight global sugar outlook and an upward pressure on prices.

• Potatoes: The national retail price of potatoes remained stable from the previous period, leading to an average price of almost 41 KGS/kg. As of 11 March 2022, the highest prices were observed in Naryn province (44 KGS/kg) and the lowest prices in Batken province (35 KGS/kg). The price of potatoes was 20 percent and 84 percent higher than March 2021 and February 2020 respectively, an increase above normal annual price fluctuations.