Uzbek pay raises trigger price increases

Consumers unhappy over no gain in buying power

By Shakar Saadi

2010-08-03

TASHKENT – A boost in salaries and welfare payments has led to price increases that have negated those raises, many Uzbek consumers say.

On July 9, President Islam Karimov decreed pay and welfare increases of 20% beginning August 1. The minimum monthly wage grew by 7,535 UZS ($3.40) to 45,215 UZS ($20.10).

But hopes for a spike in buying power evaporated as prices for consumer goods and food rose 20-25% after the announcement.

“Some of our expenditures and taxes are based on the minimum wage, and once this factor increases, it means our costs will be higher,” said Tashkent grocery kiosk owner Boris Nazarov. “So we have to raise prices.”

Some vendors raised prices the day after the Karimov announcement, he said.

“The price of goods is made up of different components, which include transportation costs and the dollar’s black-market exchange rate,” Abduvali Zunurov, an accountant for a wholesaler, said. “We need to (protect) ourselves by raising prices.”

Businesses have to adjust prices to guarantee a profit, agreed Bahodir Usmanov, a businessman, independent economist and former researcher at the Uzbek Academy of Sciences.

“Unanticipated increases in the black-market dollar exchange rate doom entrepreneurs to losses,” he said.

“Raising the minimum wage will, no doubt, replenish the state treasury, because some taxes and customs duties depend on how much the minimum wage is,” said State Tax Committee employee Husnitdin Sharipov. Those new revenues will pay for social benefits, he said.

“Prices should have risen only to cover additional fuel costs,” said Sharipov.

“One hand giveth; the other taketh away,” said retiree Farida Musayeva, who complained that inflation easily outstrips any increase in pensions.

Tashkent resident Nelyufar Aliyeva receives social assistance for her two children. The state’s apparent concern for citizens is a sham, she said. “This increase means an automatic increase in nursery (tuition) and prices for baby food and groceries.”

Tuition at state-funded nurseries and kindergartens largely is indexed to the minimum wage, Ulugbek Daulonov of the Education Ministry said.

“Inflation and tax increases keep us from raising our employees’ salaries,” said Irina Silayeva, the director of an advertising agency.

Also instrumental to inflation is the cost of gasoline, which has risen 15% this year.

“The increases won’t stop here. Soon you can expect to see higher energy and utility rates,” said Usmanov.

Consumer price inflation will continue to outpace any wage increases, he said.

Meanwhile, the state is trying to regulate price increases for some foods.

The Tashkent mayor’s office tacitly set a ceiling for meat prices at 6,500 UZS (US $2.90) per kg, a source inside the office said.

The mayor’s office declined comment.

Market vendors confirmed the new price but said they would ignore it. “Why should I sell meat at 6,500 UZS if it costs me 10,000 (UZS per kilo)?” asked butcher Muzaffar Jurayev, incredulous.

The wage and benefit increase is the first in 2010, but the government raised benefit payments in August and December 2009.

The public has prospered greatly in recent years, according to a Finance Ministry press release. Real income grew 19.6% between the first quarters of 2009 and 2010, it said.

Such figures are inflated, Usmanov said. Wages and pensions have not increased in real terms since 1991, he said.

“A real increase in wages and pensions stimulates financially sound demand, the expansion of domestic trade and the improvement of consumption patterns,” said Usmanov. In his opinion, Uzbekistan has yet to accomplish this task.

Post a Comment ( Comment Policy )

* denotes required field

Reader Comments

  • 20% wage increase is always nice. Uzbekistan has so much potential. If it just could be a little bolder in implementing market reforms. One thing is certain, fixed prices never made a single economy truly sustainable and prosperous.

    August 31, 2010 @ 03:08:00PM
  • This is Uzbekistan. Soon it will be a heaven. We will thrive.

    August 9, 2010 @ 10:08:00AM Алишер