TURKMENISTAN FOOD MARKET - IMPACT OF UNIFIED CURRENCY

UNCLAS ASHGABAT 001063 SENSITIVE SIPDIS STATE FOR SCA/CEN ANKARA FOR AGRICULTURAL COUNSELLOR E.O. 12958: N/A TAGS: EAGR ECON ETRD PGOV TX SUBJECT: TURKMENISTAN FOOD MARKET - IMPACT OF UNIFIED CURRENCY EXCHANGE ON FOOD PRICES ¶1. (U) Sensitive but unclassified. Not for public Internet. ¶2. (SBU) Three months after the unification of the government's dual currency exchange rates, prices for imported food items, including cooking oil, sugar and butter decreased 10 percent on average, returning to December 2007 price levels. At the same time, although prices for local food items remained steadily high since January, some of them, including rice and chicken, have continued to increase -- probably due to rising production costs. The increased price for rice reflected higher fees for land rent, irrigation water, fertilizers and transportation. Poultry producers raised their prices due to the increased cost of poultry feed and transportation services. Food Item 08/08 05/08 % change TMM TMM Bread (1 homemade) 8,000 8,000 0 Flour (1 kg) 16,000 16,000 0 Rice (1 kg) 35,000 28,000 25 Butter (1 kg) 120,000 130,000 -8 Veg. Oil (1 lit) 45,000 50,000 -10 Sugar (1 kg) 16,000 18,000 -12 Beef (1 kg) 70,000 70,000 0 Lamb (1 kg) 60,000 60,000 0 Chicken (1 kg) 60,000 55,000 9 Milk (1 lit) 15,000 15,000 0 Cheese (1 kg) 150,000 150,000 0 Eggs (ten) 25,000 25,000 0 ¶3. (SBU) While the higher value of the manat against the dollar may have contributed to price decreases for imported food items, these drops could also be the result of the government's August 1 decision to lower import tariffs for all consumer goods except cars. The need for the revision was caused by the tripling of import taxes after the manat exchange rate was unified at 14,250 manat/USD. (Note: Prior to exchange rate unification, import taxes paid in manat were calculated at the official rate of 5,300 manat/USD. END NOTE.) ¶5. (SBU) COMMENT: The government was well aware of popular discontent with food price inflation in the first six months of ¶2008. With its attempts to control rising prices through price controls proving unsuccessful, it seems to be focusing now on keeping prices low by decreasing tariffs and by increasing the supply of imported goods -- occasionally at subsidized prices -- in the market. While these measures appear to be working for now, many remain skeptical that they can work in the long term. CURRAN