ASHGABAT - Wednesday, August 01, 2012 -
The Turkmen government has made major cuts to the subsidies it has traditionally provided to its population.
In July, it removed a subsidy system for flour which had been in place for the last 15 years. Each household used to get coupons which they could exchange for flour at a special low price.
In addition, the authorities cut the list of drivers eligible to buy fuel at subsidized prices. This means an end to the system where private-sector truck drivers could get 1,200 liters [317 gallons] of cut-price fuel every six months. Now the only eligible group is the owners of cars and other light vehicles, who can buy 720 liters [190 gallons] of subsidized petrol or diesel every half-year, and motorcyclists, who get 240 liters [64 gallons[.
One reason for cutting the flour subsidy, analysts say, is that this year’s wheat harvest was poor. Turkmenistan also imports flour, as it does with most of its foodstuffs, but this is expensive.
The price of food and consumer goods have all been rising, so the cuts in subsidies will hit shoppers especially hard.
Some experts believe that even with its substantial gas export revenues, the government has decided it can no longer afford to underwrite the subsidies and benefits that have been a feature of Turkmenistan since independence in 1991.
As one employee of the economy and development ministry put it, "This is the end of the free life."
An economic commentator explained that state subsidies pervade much of the economy, making it hard to calculate how much things cost.
"We need to create a healthy competitive environment, and force a move away from dependency, but a subsidy-based economy makes that difficult," he said. "I expect the authorities will take further steps to move towards a market economy."
An economist with the state statistics agency said that it was time to wean consumers off excessively low prices, in a country where petrol costs just 22 U.S. cents a liter [0.26 gallons].
"Prices should have conformed with reality a long time ago,” he said. "Everything is cheap here in any case."
An economist in Ashgabat also said the government was doing the right thing, pointing out that this was in line with recommended policy for resource-rich states like Turkmenistan.
A recent report from the United Nations called “From Transition to Transformation: Sustainable and Comprehensive Development in Europe and Central Asia” argued that subsidizing electricity and heating costs was wasteful, and that prices must be used to change consumption patterns.
"The authorities are serious about modernizing the economy and introducing market components, because they’ve realized that even a gas-rich state has to go down the road of lifting subsidies,” he said.
(This story was originally published by IWPR.net. It is republished here with permission)