Inflation accelerating worldwide: How Azerbaijan responds?

By Trend

The acceleration of inflation is becoming global, remaining no more a problem of any particular country, Trend reports.

This is primarily due to the increase in world food prices in the context of the COVID-19 pandemic and adverse weather conditions in some countries.

The acceleration of world food inflation affects the growth of domestic consumer prices in an average of two months. The inflation’s global acceleration is also due to the lack of supply of goods in the face of a disruption in global supply chains and an increase in tariffs for international transportation, primarily container shipping, again in connection with the pandemic. Besides, energy products are becoming more expensive.

According to the World Bank, in 2021, energy prices rose by 77 percent year on year, while non-energy prices - by 20 percent. World food prices hit a 10-year high last year.

In Azerbaijan, the average annual inflation was 6.7 percent, food inflation - 8.1 percent, non-food inflation - 5.1 percent, and annual inflation - 12 percent.

Inflation in the country is caused solely by external causes. The lifting of restrictions imposed in connection with the COVID-19 pandemic affected the economy, and as a result, there was an increase in prices for products imported into Azerbaijan.

The country is taking consistent steps to mitigate the consequences of rising inflation. So, in 2021, the amount of subsidies for each ton of flour and flour products sold on the domestic market was increased. Besides, the deadlines for VAT exemption for the production of flour, bread and their sale were extended until 2024, and large grain importers were provided with soft loans at the expense of the Central Bank of Azerbaijan (CBA).

To prevent price manipulations in the sales market, the State Service for Antimonopoly Supervision and Control of the Consumer Market has determined the maximum allowable prices for flour and bread.

The wholesale price for a bag of flour of 50 kilograms was set at 35.9 manat ($21.1), the retail price for 650-gram and 500-gram traditional (round) breads – 65 gapiks (38 cents) and 50 gapiks (29 cents), respectively.

In order to prevent unreasonable changes in flour prices, as well as the weight and cost of traditional (round) bread, to control quality parameters in the consumer market, monitoring is regularly carried out, and necessary measures are taken to comply with antimonopoly laws. In case of detection of violations of the law, the State Service for Antimonopoly Supervision and Control of the Consumer Market will take strict measures.

Given the rise in prices for basic products in the world food markets, special attention is paid to the issues of food supply and food security of the country, reducing the level of dependence on imports.

To ensure the food security of Azerbaijan, it is planned to use the agricultural potential of the lands liberated from Armenian occupation [in the 2020 second Karabakh war]. The main priority in the field of agriculture is to achieve qualitative changes and increase productivity.

The relevant state bodies were instructed to submit proposals to the government on the Action Plan to strengthen anti-inflationary measures in a short time.

According to the CBA forecasts, inflation in Azerbaijan will slow down from mid-2022. The regulator expects that the stabilization of global inflation will reduce its impact on inflation in the country.