Tariff Increase: Experts on Inflation in Kazakhstan

Housing and utilities tariffs in the country have risen sharply. Cold water, for instance, has become 60% more expensive. Such a figure stands out, considering official inflation stands at 8.5%. Orda.kz has looked into the matter.

Tariff Growth Beyond Inflation

The Office for National Statistics has released monthly inflation figures for October. If you look at price increases based on last month's figures alone, it may seem like goods and services have only slightly gone up in price: cucumbers have gone up by 9.7%, tomatoes by 8.6%, oranges by 6.7%, salt by 6.5%, eggs by 3.2%, and sunflower oil by 2.4%.

Prices grew the fastest in Almaty, followed by West Kazakhstan Region and Ulytau.

Compared to October 2023, Kazakhstanis began to pay 60.3% more for cold water. We have already drawn attention to the fact that the water supply has sharply increased in price, specifically in Almaty.

Public utilities provided by state-owned enterprises are becoming more expensive against the backdrop of eye-catching schemes, as with QazaqGas. 

Heating, which has not been brought online without a hitch, has also increased in price by 33.6%, water disposal by 26.9%, and electricity by 22.9%. Hot water has increased by 18.1%, and garbage removal will cost 16.3% more.

Other services have also become more expensive. Train travel has increased in price by 23.7%, communications by 17.4%. Prices for medicines have increased significantly.

Who Is Responsible?

Economist Anuar Bakhitkhanov calculated that more than four percentage points of the monthly inflation growth from September to October were accounted for by state-owned or state-controlled companies.

The growth of utility prices exceeding the general inflation rate is a cause for concern, especially if it significantly outpaces the growth of household income. A 60.3% increase in tariffs for cold water with general inflation at 8.5% could significantly reduce the purchasing power of citizens and increase social tension, Anuar Bakhitkhanov believes.

Majilis deputy Askhat Rakhimzhanov also indicated that the increase in tariffs will hit Kazakhstanis' pockets. He noted that Kazakhstanis' salaries lag behind inflation.

The decline in purchasing power will be especially noticeable against the backdrop of low income growth. I think the government should be concerned about this problem and seriously consider increasing minimum wages, benefits, privileges, and tax breaks for small and medium businesses, the deputy believes.

However, utility rates are not rising for no reason.

Everything is natural here. Firstly, inflation is growing because economic indicators have slowed down in general. Secondly, the forecast price of oil last year turned out to be too high. That is, we are selling at a lower price than planned. Thirdly, tariffs have also increased due to the fact that repair work on utility networks has been included and additional investments are being attracted. And it is important for investors to have guarantees of return on investment. Therefore, tariffs are growing to make the industry more attractive for investment. But the old infrastructure has already proven that this is fraught with houses with cold temperatures, power grid failures and other consequences,
noted Askhat Rakhimzhanov.

Economist Anuar Bakhitkhanov also believes that the water supply tariff increased by 60.3% due to the renovation of networks and treatment facilities. 

Deputy Askhat Rakhimzhanov believes that foreign policy factors also play a role. According to him, the disruption of supplies due to the war in Ukraine affects the price at which the country buys spare parts and other goods. Routes had to be restructured logistically.

According to Anuar Bakhitkhanov, the rise in electricity prices will affect the cost of food.

Increasing electricity prices has a multiplier effect on the economy. Increasing electricity costs increases the cost of producing goods and services, which can lead to an overall increase in prices,  the expert notes.

Original Author: Alexandra Mokhireva