YEREVAN (RFE/RL)—A senior official from the International Monetary Fund praised on Friday the Armenian government’s efforts to rein in rising inflation and, in particular, its extraordinary plans to regulate key food prices.
President Serzh Sarkisian, meanwhile, ordered his government to do more to stop the “disproportionately” high cost of life in the country from rising further. Echoing the views of his critics and Western donors, he said the authorities should address a lack of competition in imports of basic foodstuffs.
The government approved on Thursday a bill empowering it to impose temporary price caps on 20 foodstuffs if their retail prices soar by at least 30 percent within a month. The list of those products includes bread, meat, dairy products, cooking oil, sugar, and some vegetables.
Guillermo Tolosa, the IMF’s resident representative in Armenia, reacted positively to the move. “I think the government is taking all the measures it can to address the inflation issue, the increase in prices,” he told RFE/RL’s Armenian service. “Its response is along the lines of the best international practice. It has increased the interest rates, it has helped farmers to increase the supply of agricultural goods, and public spending is very moderate.”
“So we think that the government is taking all the measures that should be taken in order to make the inflation problem as manageable as possible,” said Tolosa.
Official statistics show that despite these anti-inflation efforts, the Armenian consumer price index in the first two months of this year was up by as much as 11.5 percent from the same period of 2010. Food prices alone jumped by 18 percent year on year.
Consumer price inflation already reached 9.4 percent in 2010, the highest level in years. The authorities blamed it on a slump in domestic agricultural production and increased international prices for wheat and fuel.
Tolosa indicated that a de facto monopolization of some sectors of the Armenian economy has also been a factor. “I think the oligopolies affect the level of prices,” he said, reiterating the IMF’s calls for “deeper and bolder reforms” in the country.
“Prices in Armenia will fall only when there is competition,” said Vahagn Khachatrian, an economist affiliated with the opposition Armenian National Congress (HAK). “The administrative resources of the authorities are enough to curb inflation.”
“People engaged in imports are government representatives or people close to them, and the entire Armenian economy is managed from one point: Serzh Sarkisian’s staff and partly the government,” Khachatrian claimed at a news conference.
That a lack of business competition contributes to high inflation was acknowledged by President Serzh Sarkisian at a meeting with top state officials dealing with the economy. He told them to “conduct serious work with importers and manufacturers.” “I think that now is the right time to spur competition,” he said.
Sarkisian added that the government and the Central Bank must make sure that full-year inflation does not exceed 5 percent in 2011. He described that as a top economic priority of his administration.
Tolosa was optimistic that the 2011 inflation rate will end up below the 2010 level, despite increasing in January-February.