Price controls do not reduce the cost of living, they distort supply (Pt 1)

Dear Editor,
The Leader of the Opposition’s call for price controls is not a serious cost-of-living strategy; it is a policy instrument that, by design, suppresses supply response and shifts scarcity into queues, rationing, or informal markets. In small, open economies—where a material share of the consumption basket is imported and pass-through is driven by freight, FX, and external price cycles—administratively capping prices does not eliminate cost; it redistributes it and usually amplifies it through shortages and risk premia.
The mistake is to treat inflation as a purely domestic markup problem that can be solved with a ministerial directive. Guyana has faced the same global conditions affecting prices everywhere—shipping volatility, imported food and fuel inflation, and supply-chain disruptions—yet the Government’s response has not been rhetorical; it has been fiscal and structural. Critically, the Opposition’s argument is offered without any accounting of the scale of the existing cost-of-living interventions already embedded in the fiscal framework.
The Fiscal Shield: quantifiable cost-of-living intervention
Let us examine the empirical anchor the Opposition omits. Across zero-rated and reduced taxes on fuel, price freezes and subsidies in key utilities, and agricultural input support, the state is absorbing a significant portion of the consumer price shock—estimated at over G$500 billion annually through direct and indirect measures.
Measured against Non-Oil GDP of approximately G$1.6 trillion in 2025, this implies an intervention on the order of ~31% of the domestic economy. The mechanism matters: when the state compresses fuel-and-utility inputs and stabilises critical supply lines, it lowers delivered costs across transport, farming, processing, and retail—reducing second-round inflation and protecting real incomes without collapsing supply incentives. Price controls, by contrast, attempt to force an outcome at the shelf while leaving cost drivers unchanged, which is why they reliably translate into shortages rather than affordability.
From Administered Prices to Equilibrium Prices: Seven Drivers of Lower Structural Costs
The real solution is not to cap prices ex post; it is to lower unit costs ex ante by expanding productive capacity, improving logistics reliability, and removing large household expenditure burdens through targeted social policy. Put differently: equilibrium prices are achieved when supply expands and productivity rises faster than demand—especially in a fast-growing economy facing capacity absorption constraints. In this regard, the relevant framework is structural, not administrative, and it rests on seven linked pillars:
1. Energy (cost base of the economy): With a G$119.4 billion allocation in the 2026 Budget, the Gas-to-Energy Project targets a material reduction in electricity tariffs (often cited at ~50%). Lower power costs compress the cost curve for cold storage, agro-processing, manufacturing, and services—improving firm margins, enabling reinvestment, and reducing the pass-through embedded in final consumer prices.
2. Infrastructure and logistics (market access and delivered cost): The G$196.1 billion (Budget 2026) investment in roads, bridges, and ports is not cosmetic capex; it is a competitiveness lever. Weak logistics reliability increases inventory buffers, raises working-capital costs, elevates spoilage, and widens retail markups. Improved connectivity reduces the delivered cost of food and essential goods while expanding the feasible market for domestic producers.
3. Climate-resilient agriculture (supply stability): The G$113.2 billion (Budget 2026) allocation to Agriculture—particularly drainage and irrigation upgrades—targets the core source of food-price volatility: output instability. When rainfall and flooding shocks reduce harvests, unit costs rise and imports fill the gap at higher landed prices. More resilient systems increase production reliability, reduce fiscal leakage to emergency imports, and stabilise food prices through time.
4. Food security land expansion (scale of domestic supply): As a matter of policy, the Government is moving to unlock an additional 100,000 acres of agricultural land to advance the food security agenda. This is not a marginal adjustment: with roughly 1.04 million acres of total agricultural land and only about 32% currently in cultivation, opening up 100,000 acres adds approximately ~10 percentage points—taking cultivated land toward ~42%. The causation chain is direct: more cultivated acreage increases domestic output potential, reduces import dependence and landed-cost exposure, and dampens food-price volatility by stabilising supply through time.

Sincerely,
Joel Bhagwandin