Prime Minister responds to MPs' request to introduce maximum retail prices for socially important food products

The state establishes regulation of prices and tariffs in order to ensure national security, protection of public order, human rights and freedoms, and public health in the country.

Today, prices and tariffs for goods and services are determined independently by business entities, except in cases provided for by the Entrepreneurial Code (Article 116).

At the same time, any state regulation of prices makes it less attractive for businesses to produce a good or service. The key problem in industries with regulated prices is insufficient investment, which ultimately leads to obsolescence of fixed production assets, low labour productivity, non-competitiveness and low quality of output.

State regulation of prices cannot solve systemic issues, but can lead to deferred inflation in the medium term. Subsidised prices continue to stimulate consumption growth, putting additional pressure on prices.

Government intervention in the market pricing process should be a measure of last resort when other instruments of state regulation cannot be used due to objective reasons.

A phased transition to market-based pricing is a necessary measure. It may lead to higher prices and tariffs in regulated markets in the short term. However, in the medium term, it will make it possible to significantly improve infrastructure, renew fixed assets, increase the efficiency of enterprises and improve the quality of goods and services provided.

Government price regulation, being an interference in the market pricing process, gives wrong investment signals to potential competitors regarding the profitability of the respective product market.

Attempts to regulate the prices of individual goods by setting a price ceiling have shown the emergence of the so-called "pull-up" effect, where prices start to pull up to the ceiling threshold determined by the state.

The cost method of pricing reduces the efficiency of resource allocation, pushing regulated market players to increase their expenditure side, the growth of which is subsequently covered by a direct increase in selling prices.

In order to eliminate factors that lead to distorted pricing and, as a consequence, eliminate price competition, the Government, together with the Agency for Protection and Development of Competition, is taking measures to gradually replace price regulation tools with antimonopoly control tools.

In addition, in order to reduce inflationary pressure, the Government together with the National Bank is implementing a set of measures to control and reduce inflation for 2023-2024 (hereinafter - the Set of Measures), which provides for measures of systemic and operational nature.

In particular, the Package of Measures includes measures aimed at reducing import dependence and saturating the domestic market with domestic goods, stimulating manufacturing industries, creating conditions for storage and logistics of goods, supporting retail trade, antimonopoly and foreign trade regulation, and others.

Work continues on eliminating unproductive intermediaries, developing trade infrastructure and improving access to markets.

Also, on the analytical platform on trade - «szpt.qdata.kz» the Ministry of Trade and Integration on a weekly basis monitors and analyses data in the context of regions on changes in prices for socially important food products, availability of stocks in stabilisation funds and within the «revolving scheme», which allows to promptly take appropriate response measures.

Detailed information on the issues raised in the parliamentary enquiry can be found here.