A draft law tentatively approved by Prime Minister Tigran Sarkisian’s cabinet would empower the government to limit the maximum cost of 20 foodstuffs if their retail prices soar by at least 30 percent within a month. The price caps could not be in force for more than 90 days.
The list of products subject to price regulation also includes cooking oil, salt, sugar, potatoes and other vegetables.
The extraordinary measure, which requires parliament approval, reflects the Armenian authorities’ failure to restrain the rising cost of life in the country with conventional methods such as lending rate increases.
Consumer price inflation hit an annual rate of 9.4 percent last year, surpassing the maximum government target of 5.5 percent. The authorities blamed it on a slump in domestic agricultural production and increased international prices for wheat and fuel. Some Armenian officials acknowledge that the de facto monopolization by government-linked businessmen of food imports to the country was also a factor.
Official statistics show that despite government pledges to cut inflation, the 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.
Speaking at a cabinet session, Prime Minister Sarkisian defended what would be the first government regulation of food prices in Armenia since the start of its transition to a market-based economy in the early 1990s.
“Obviously, this [policy] instrument is rarely used [by governments] and its use is not desirable,” he told ministers. “But the use of such a instrument automatically has a positive impact on market players.”
“They become conscious of the fact that if they create a speculative environment or panic in the market, the state may take tough measures,” he said.
Gagik Khachatrian, the head of the State Revenue Committee, openly voiced misgivings about the measure. “There are lots of issues that need clarification,” he said at the meeting.
Officials indicated that the bill approved by the government may undergo some changes before being sent to the National Assembly.