As reported worldwide in recent weeks, the United Nations and World Bank warn that a world food crisis is possible. The rise in prices for food and foodstuffs jeopardizes many countries’ stability and security.

The rise in food prices on the world markets unavoidably provokes inflation in small countries like Armenia. Prices for imported foodstuffs particularly grow here. According to Armenia’s National Statistical Service, in the course of three months, from December 2007 to March 2008, prices for foodstuffs grew by 7.2 percent.

The results of a longer-term monitoring show that in the period from March 2007 to March 2008 the growth of prices for baked products in Armenia increased 33.9 percent, animal and vegetable oils – 33.32 percent, vegetable and potato – 5.6 percent, coffee, tea and cocoa – 9.6 percent.

Economist Tigran Jrbashyan thinks that one of the culprits of the world food crisis is the deformed agricultural sector.

“Many of the developing countries today have a food problem and have found themselves on the verge of famine,” he says. “The cost of wheat has increased by 130 percent during the past year, the cost of rice has grown by 80 percent.”

Rising oil prices as well as expensive fertilizers used in agriculture, according to the economist, have a shorter-term impact.

“The world already went through this stage once in the late 1970s, early 1980s when the peak in oil prices led to a high cost of agricultural products,” the economist explains.

Doctor of economics Zoya Tadevosyan describes the current situation of the world economy as critical. The rise in prices for energy resources, according to her, “pushes forward” the world economy crisis the consequences of which unavoidably affect all economies, especially those that lack energy resources and have to import them.

“If one barrel of oil sold for 40-45 USD on world commodity exchanges, then today one barrel of oil hits the level of 118 USD. It is an unprecedented high price. The rise in fuel prices is accompanied with rising transportation costs; consequently commodity prices, especially of imported goods, grow up.”

Tadevosyan says that the next cause of the lingering crisis is the gradual fall of the dollar’s exchange rate [against the world’s major currencies].

Tadevosyan thinks Armenia cannot avoid the impact of such objective processes. “If we consider the circumstance that our country fully imports fossil fuel and oil and, for example, in 2006 the share of import of that commodity group in gross imports was 16 percent, then of course, Armenia cannot,” she says.

According to Jrbashyan, the state should offer mechanisms of subsidizing that won’t deform the market (as it happened with the gas subsidy), but will alleviate the first blow, i.e. it should clearly target socially vulnerable strata. In the economist’s opinion, it is a fundamental issue.

“If a fall in prices is observed on the world market, it is not observed on our market and will not be observed. We lack an effective link between our prices and international prices. It is a deformed link because of the uncompetitive price formation,” he says.

Economist Eduard Aghajanov says that the rise of prices in Armenia is a gross result of the electoral processes. “It is a typically Armenian phenomenon regardless of whether the price on the international market grows or not, in Armenia after every election a hike in prices takes place. There is only one explanation to it – oligarchs who mainly spend their own money participate in the election and they have the purpose of recovering the money they spend.”

The State Commission for the Protection of Economic Competition has conducted daily monitoring of prices for consumer goods, including butter, cooking oil, rice, bread, flour, granulated sugar.

Commission Chairman Ashot Shahnazaryan says that there have been no illegal rises in prices. The highest price growth in the recent period was observed on the pork market, reflecting world trends as a consequence of such conditions as swine flu.

In connection with vegetable and animal oil markets Shahnazaryan says that prices have grown by 1-2 percent, which is connected with fluctuations observed on the world market.

“Inflation pressure in Armenia is not higher than in the world, on the contrary, the rate of inflation here, if compared to similar countries, has always been less, and it is registered both in international reports and regional analyses. In this sense, inflation in Armenia has always been on a low level and I think that it will be continued,” said Prime Minister Tigran Sargsyan.

Economist Tatul Manaseryan also thinks that objective causes of inflation should be sought in international markets, but there are also causes that exist in the country’s internal market conditioned by monopolies and other tightly restricted influences.

Aghajanov shares this opinion: “Those are monopolistic positions of certain producers and the clan-based economy system. Add to these two the external factor and the ‘burden’ of our economy becomes heavier. For this reason, if in Russia, for example, inflation is 20 percent, then in Armenia is it doubled,” he says.

Inflation in Armenia in 2008 is projected at 7-7.5 percent, however, prices for a number of staple food products, such as breadstuff, flour, dairy products, animal and vegetable oil, granulated sugar have risen by 15-20 percent.