Government of Kazakhstan jointly with National Bank developed a set of measures to control inflation

At the government session chaired by the Prime Minister of the Republic of Kazakhstan Alikhan Smailov, measures to prevent the growth of inflation, increase in prices for food and oil products were considered. Minister of National Economy Alibek Kuantyrov said that since last year, inflation has been one of the main macroeconomic trends.

The main factor is the rise in food prices in the world. This is a consequence of the still ongoing recovery of supply chains after the global pandemic. As a result, the world's major economies experienced record inflation rates in 2021.

According to the minister, in Kazakhstan in 2021, there was also a worsening of the inflationary background. The main contribution to the acceleration of inflation was made by food products, including socially significant food products. In order to curb price growth, a set of anti-inflationary response measures for 2021-2024 was adopted in September last year.

It consists of activities in 2 areas — operational and medium-term measures.

“These measures provide for curbing price increases, as well as systemic measures aimed at maintaining inflation rates within the approved target corridor,” said the minister.

As a result of the implementation of the Package of Measures, it was possible to reduce inflationary pressure on the economy, as a result of which inflation slowed down by 0.5 percentage points in December 2021. At the same time, inflation dynamics in other countries continued its upward trend.

In his speech at a meeting of the Majilis on January 11, 2022, the Head of State instructed the Government, together with the National Bank, to develop a set of measures to control inflation.

As part of the execution of the instructions of the Head of State, the Government has already taken the following measures:

  • tariffs for utilities have been frozen;
  • a ban was introduced on the export of certain goods from the territory of the Republic of Kazakhstan;
  • marginal prices for fuels and lubricants were set and a ban was introduced for a period of 6 months on the export of gasoline, diesel fuel and certain types of petroleum products by road.

As part of the further execution of the instructions of the Head of State, it is proposed to implement a number of measures to improve the physical availability of goods, price regulation, the introduction of state control measures, as well as systemic measures to reduce inflation.

Measures in the first direction include increasing funding for spring field work, improving the mechanism for subsidizing the agro-industrial complex, implementing import-substituting projects in a number of industries, and other activities.

Measures in the second direction include the application of measures to prevent the growth of coal prices, a moratorium on the increase in prices for utilities, and the definition of a projected corridor of threshold prices.

Measures under the third direction include the adoption of antimonopoly response measures based on the results of monitoring prices in certain markets, reducing the intermediary link in the oil and petroleum products market, and developing exchange trading.

“As part of systemic measures, it is planned to build a forecast balance of consumption / production of the main types of agricultural products and other food products included in the consumer basket, to take prompt response measures based on the results of monitoring,” Kuantyrov noted.

As a result of the implementation of the measures taken, it is expected that inflation and its components will be kept at the target level and that there will be no shortage of goods.

In order to increase the efficiency and transparency of access to state support measures, the system of subsidizing the agro-industrial complex will be revised with the fixation of counter obligations of their recipients. The measures taken will contribute to the gradual stabilization of prices and the improvement of the business climate, including the investment one.

Ministry of Agriculture developed a unified integrated state information system for subsidizing

In pursuance of the instructions of the Head of State announced during a speech in the Majilis of the Parliament of the Republic of Kazakhstan on Jan. 11, 2022, the Ministry of Agriculture is taking a number of the following operational and systematic measures to saturate the domestic market with basic food products.

In order to ensure physical availability and stabilize prices for socially significant foodstuffs, the ministry is taking measures of non-tariff regulation of the export of goods:

  • quantitative restrictions on the export of sunflower seeds and sunflower oil for a period up to July 1, 2022;
  • a ban on the export of potatoes and carrots for a period of 3 months;
  • a ban on the export of live cattle and small cattle for a period of 6 months;
  • a ban on the export of grain forage is being introduced.

The possibility of organizing the supply of imported fruits and vegetables during the off-season is being explored.

In order to ensure the physical availability of food products on the domestic market, it is necessary, first of all, to carry out timely and high-quality spring field work.

“According to the regions, in 2022 it is planned to place crops on an area of ​​22.9 million hectares, which is 13.5 thousand hectares more than in 2021. Last year's drought, as well as a sharp increase in prices for spare parts, fuels and lubricants, mineral fertilizers and pesticides create serious difficulties for the timely preparation and quality of the upcoming spring sowing,” the Minister of Agriculture Yerbol Karashukeev informed.

To carry out activities to support the subjects of the agro-industrial complex, an increase in concessional lending to farmers from the republican budget through the Ken Dala program in the amount of up to 140 billion tenge is being worked out for growing crops, including for the production of early vegetables and socially significant food products.

Issues are being resolved to provide agricultural producers with cheaper diesel fuel for spring field work.

On behalf of the Head of State, proposals have been prepared to adjust the system of state support for the industry, which will be aimed primarily at simplifying its mechanisms and optimizing directions, focusing on the final result. A rule is also being introduced, according to which the recipients of the subsidy will without fail accept counter obligations to achieve specific indicative indicators.

“The proposals are currently being considered by the established working group to improve the efficiency of state support for the agro-industrial complex, which includes representatives of industry associations and unions, agribusiness, science, interested state and local executive bodies, as well as deputies of the Senate and Majilis of the Parliament of the Republic of Kazakhstan. Currently, three meetings of the working group have taken place,” the Minister of Agriculture said.

Based on the results of the working groups in March 2022, the final package of changes to improve the subsidy system is planned to be submitted to the Government for consideration.

In addition, the ministry has developed a unified integrated state information system for subsidies.

“Services of the information system for recipients of subsidies will be free. Currently, we are launching its testing in a pilot mode in the Akmola region,” Karashukeev said.

Within the framework of import substitution measures, the provision for the main types of food products on the domestic market due to domestic production is 80 percent or more.

Given the importance of maintaining and increasing the level of food security, within the framework of the National Project for the Development of the Agro-Industrial Republic of Kazakhstan for 2021-2025, investment projects are being implemented, including on import-dependent positions, to increase the production of foodstuffs at a level of at least 80% (poultry meat — 100%, sausages — 100%, cheeses and cottage cheese — 100%, apples — 100%, fish — 100% and sugar — 80%).

To maintain marginal tariffs, it is necessary to ensure preservation of prices for fuel and their transportation — Ministry of Energy

At the moment, the ministry has developed the following measures aimed at stabilizing the fuel and lubricants industry, including:

- establishing state regulation of prices for gasoline and diesel fuel, relevant orders have been adopted on setting marginal prices for the retail sale of petroleum products.

Prices for petroleum products:

1) AI-80 gasoline — 89 tenge per liter;

2) AI-92 gasoline — 182 tenge per liter;

3) AI-93 gasoline — 182 tenge per liter;

4) AI-95 gasoline — 215 tenge per liter;

5) diesel fuel (summer, off-season) — 230-260 tenge per liter.

In addition to additional measures to control the flow of fuels and lubricants, in view of the disparity in prices in comparison with neighboring countries, members of the EAEU, the ministry proposes:

  • a ban on the entry of vehicles with self-installed tanks;
  • limiting the crossing of transit transport no more than 1 time per day;
  • a ban on the shipment of certain petroleum products by railway transport without payment of ETP outside the Republic of Kazakhstan;
  • strengthening control of the ban on the export of petroleum products by road at the borders by the authorized bodies;
  • the possibility of establishing differentiated prices for imported fuel at filling stations;
  • clear regulation of procedures for the supply of diesel fuel for spring field work;
  • the possibility of increasing the ETP for petroleum products and semi-finished products, with the exception of gasoline and diesel fuel, not lower than the ETP for oil.

In order to ensure full control over the situation on the liquefied gas market, the following operational measures have been taken.

The Ministry of Energy approved 2 orders:

1) an order to suspend the Trading Rules until Jan. 1, 2023, according to which the Ministry of Energy will sell liquefied gas outside of electronic trading;

2) an order to reduce the marginal wholesale price of liquefied petroleum gas. In order to comply with the maximum prices for the retail sale of liquefied petroleum gas established by the Agency for Protection and Development of Competition.

Also, to date, an order has been developed to amend the Rules for the formation of a plan for the supply of liquefied gas to the domestic market outside electronic trading platforms.

According to the Minister of Energy Bulat Aqchulaqov, these amendments are aimed at providing the country's domestic market with liquefied gas by expanding the list of entities that have the right to wholesale and retail sales in the republic.

As a short-term measure, until the end of January this year. Comprehensive measures will be introduced to the Government to further improve the trading of liquefied gas through the ETP/commodity exchanges, taking into account the introduction of transparency principles and mechanisms that limit the sharp rise in prices for liquefied petroleum gas.

After agreement with the Government, these measures will be formalized in the form of amendments to regulatory legal acts.

“In order to fulfill the instructions of the Head of State to introduce a moratorium on rising prices for utilities, it is necessary to ensure that the levels of marginal tariffs for the production of electricity by energy-producing organizations are maintained. In turn, more than 50% of the costs from the stations are for the purchase of fuel — gas, coal and services for their transportation, including by rail. To maintain the levels of marginal tariffs, it is necessary to ensure that prices for fuel and their transportation are maintained. These measures will ensure the stable passage of repair campaigns for the next autumn-winter period,” Aqchulaqov explained.

Work is underway with coal mining enterprises to keep prices for the energy sector — Uskenbayev

According to the Minister of Industry and Infrastructure Development Kairbek Uskenbayev, within the framework of the Anti-Inflationary Response Measures, the department provides for measures to provide energy-producing organizations with coal at an affordable price and implement new import-substituting projects. So, according to the results of 2021, about 110 million tons of coal were mined in the country. Of these, 60 million tons are annually shipped to energy-producing organizations, about 6 million tons — to industrial enterprises and more than 10 million tons — for domestic needs.

“Now all regions are provided with coal for domestic needs. Coal is available at all coal dead ends in the regions. The price is stable,” Uskenbayev said.

Shipment of coal to the energy sector is mainly carried out by five large coal companies with the following volumes:

1) Bogatyr Komir LLP. The shipment volume is 34.5 million tons, the share of the total shipment volume is 58%;

2) Section "Vostochny". Shipment volume — 13 million tons with a share of 22%;

3) Kazakhmys Coal LLP. Shipment volume — 7 million tons, share of the total shipment volume — 12%;

4) JSC Karazhyra. Shipment volume — 3.3 million tons with a share of 5% and ArcelorMittal Temirtau JSC — shipment volume of 2 million tons.

The share of coal costs in the cost of electricity generated is 18%. Corresponding work is being carried out with coal mining enterprises to keep prices for the energy sector.

Similar work will be carried out in terms of keeping prices for rail transportation. In addition, the comprehensive plan provides for an analysis of the loading of idle and operating capacities of light and furniture industries.

In the construction industry, the list of main imported goods was analyzed and a pool of new projects implemented until 2025 was formed. Based on this, 146 new projects were identified with a total investment of 986 billion tenge. Of these, 35 projects are aimed at import substitution for such goods as ceramic and facade slabs, thermal insulation materials, chipboard, sanitary ware and interior doors.

“The implementation of the above projects will reduce import dependence by $700 million for 10 types of building materials, as well as fully cover the needs of Kazakhstan for the above goods,” the head of the Ministry of Investment and Development of the Republic of Kazakhstan said.

Similar work will be carried out in other sectors of the manufacturing industry.

Agency for Protection and Development of Competition monitors selling prices for liquefied petroleum gas on a daily basis — Zhumangarin

Chair of the Agency for Protection and Development of Competition of the Republic of Kazakhstan Serik Zhumangarin reported on the Agency's operational and systemic measures to prevent inflation growth.

Thus, in order to prevent violations of competition law, the Agency takes the following operational measures:

In the markets of socially significant food products:

- 189 antimonopoly compliance acts were concluded with manufacturers, wholesale suppliers and retail chains in terms of price containment and the establishment of a trade markup of up to 10%;

- on a daily basis from Jan. 5, 2022, prices are monitored for all socially significant food items by region.

Eight investigations are underway on grounds of anti-competitive concerted practices and abuse of dominance:

- 6 investigations against egg producers;

- 1 sugar investigation;

- 1 chicken meat investigation.

“In order to quickly identify and suppress the facts of overpricing for consumer goods and services, a hotline has been created to receive messages. To date, the Agency's hotline has received more than 2,000 calls, of which about 50% of calls come from residents of Almaty, 30% from Nur-Sultan, 20% from other regions. At the same time, 70% — on the facts of exceeding prices for socially significant food products,” said Zhumangarin.

In most cases, the prices of goods are inflated by retailers, in particular in convenience stores, which do not comply with the trade markup of 15%. As a result, on incoming complaints, the antimonopoly body takes measures within its competence. Complaints about price increases in convenience stores are forwarded to local executive bodies. Other complaints are under the responsibility of the authorized bodies. In this regard, in accordance with paragraph 1 of Art. 9 of the Law of the Republic of Kazakhstan "On the regulation of trading activities", it is necessary to strengthen the control and supervision functions of trade by the local executive bodies.

In the market of oil, fuels and lubricants and liquefied gas. There are 12 investigations in the diesel fuel market against retailers.

In accordance with the instruction of the Head of State dated Jan. 5, 2022 “On measures to stabilize the socio-economic situation”, marginal prices have been set on a temporary basis for a period of 180 days:

- by the Ministry of Energy for the retail sale of petroleum products;

- by the Agency on liquefied petroleum gas (autogas), taking into account the remoteness of administrative units: west — 50 tenge, south — 60 tenge, north / east — 60-70 tenge.

The Agency on a daily basis monitors the selling prices of the CIS, in case of establishing the facts of exceeding the temporary limit prices, instructions are sent on the need to reduce prices, in case of non-compliance, an administrative penalty is imposed in accordance with Article 162 of the Code of Administrative Offenses of the Republic of Kazakhstan.

“In turn, in the event of significant price fluctuations and unfavorable trends in the economy, the Agency expresses its readiness to establish state price regulation in certain commodity markets as a temporary measure. Also, together with the Ministry of Energy, an agreement was reached with gas producers to compensate gas retailers for the difference between the old and new wholesale prices. Together with the General Prosecutor's Office, investigations have been appointed against 6 wholesale distributors of the CIS and 180 retailers of liquefied petroleum gas,” the chair of the Agency reported.

Preliminary results of the investigation showed that the main reason for the rise in prices was the imperfection of the pricing mechanism on the electronic trading platform. In this regard, last year amendments were made to the legislation “On Gas and Gas Supply” and on Dec. 30, 2021, the Head of State signed the Law “On Amendments and Additions to Certain Legislative Acts of the Republic of Kazakhstan on Trading Activities, Development of Exchange Trade and Protection of Personal Data” and already this year, the sale of liquefied petroleum gas will be transferred to commodity exchanges and will be under constant control.

An investigation is underway against the organizer of the trading platform JSC "ETS Commodity Exchange" on the fact of failure to comply with the notification.

The Prosecutor General's Office, with the involvement of the Agency's employees, began inspections in relation to 102 market entities, including in relation to the organizers of the auction. Additionally, within the framework of complaints received via the hotline, the Agency appointed an investigation against the Yandex taxi aggregator on the grounds of coordination of economic activity.

In order to carry out further anti-inflationary work, the Agency will continue antimonopoly measures, namely, analysis, conclusion of antimonopoly compliance, issuance of notices, orders, and investigations. For 2022, the Agency has planned to conduct analyzes in 26 product markets, incl. in the main consumer markets, such as:

- wholesale and retail sales of coal, electricity, petroleum products, commercial gas, installation of utility meters, services for PCR diagnostics of coronavirus infection, medicines, domestic scheduled transportation of passengers by air, communications, etc.;

- monopoly groups in order to assess the impact of their activities on changing commodity markets, economic efficiency;

- private and state operators for their reduction.

The measures taken as a result of comprehensive work will help stabilize the situation in these markets. In general, to combat the main factors of price growth that affect the volatility of the inflation rate, the Agency proposed a number of systemic measures in the draft "Complex of anti-inflationary response measures for 2022-2024", within which the relevant work will be continued.

Ministry of Trade and Integration approved a methodology for introducing threshold and marginal prices for socially significant food products — Sultanov

As the Deputy Prime Minister - Minister of Trade and Integration Bakhyt Sultanov noted, to implement the instructions of the Head of State on curbing the inflation and strengthening state regulation, authorities have developed a number of measures. Interdepartmental interaction will be coordinated at the Government level.

The minister reported on measures to curb prices for socially significant food products.

First, these are measures to ensure the physical and affordability of the main types of foodstuffs. In this direction, the Ministry of Agriculture is systematically working to saturate the domestic market with domestically produced goods.

“At the moment, a five-month supply of basic types of food is practically provided, which guarantees us the prevention of shortages in the market. The Ministry of Agriculture, together with the Ministry of Trade and Integration, will determine the production-consumption balances and, if necessary, export restrictions,” Sultanov said.

Second, measures aimed at preventing price increases by strengthening state control over trade allowances and rewards, as well as the timely introduction of price caps.

Third, in the event of a risk of high price growth, within the competence of the antimonopoly authority, the introduction of state price regulation for specific commodity markets.

To date, the Ministry of Trade and Integration has approved a methodology for introducing threshold and marginal prices for socially significant food products. The new methodology will prevent the growth of prices on the shelves within a given inflation corridor. Threshold prices for the 1st quarter of this year have already been approved.

“On the part of akimats, enhanced monitoring and control over compliance with the size of the trade allowance and preventing the collection of remuneration by retail chains will be carried out. The public will be involved in this work. Retail chains that overstate the premium will be held administratively liable,” the Deputy Prime Minister of the Republic of Kazakhstan said.

Bakhyt Sultanov also noted the following.

1. Along with the measures taken to fix prices for oil products and liquefied gas, the Ministry of Energy has additionally developed measures to contain prices for fuels and lubricants, electricity and their transportation.

2. Also, the Ministry of Industry and Infrastructure Development is taking measures to prevent the growth of coal prices.

3. If there are signs of collusion or abuse of a monopoly position by business entities, the Agency for the Protection and Development of Competition will immediately take antimonopoly response measures.

In general, the direction of the work of state bodies will be aimed at solving the problems of high inflation, with the qualitative implementation of all the measures provided for in the Operational Action Plan. On a weekly basis, the progress of implementation of all proposed measures will be reviewed.

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