An International Republican Institute (IRI) poll released last week showed that inflation has become a worry for a wide cross section of Guyanese in both rural and urban areas. Inflation, of course, can broadly be defined as rising prices of goods which translates into a fall in the value of the currency. Twenty-six percent – a shade over one quarter – of the 1500 persons surveyed said the increase in their cost of living was “serious”. This observation, however, had long been made by the government and, as was pointed out to them, was due primarily to supply-chain disruptions due to the COVID 19 pandemic and then given a boost by the disruptions precipitated by the Ukraine War.
Not that it improves our situation, but in pointing out that due to the identified factors, inflation has now become a global maybe we can better appreciate that the solution is not completely in our hands. Energy prices have been most volatile and contributed inordinately to the global price increases. Even in the US, which is the third largest exporter of oil, prices have jumped 8.5% to compound the empty supermarket shelves in some localities. As one report pointed out, “Consumers around the world are paying much higher prices for basics like shelter, food, and gasoline as Russia’s Ukraine invasion further snarls supply chains and cuts off access to oil and food exports. After a pandemic-related wave of higher prices, the conflict is now pushing global inflation past 6%. US and other central banks are increasing interest rates to reduce money supply.
China and India may need to switch to cheaper cooking oil, whose prices have surged 70% in some cases. In Senegal, Muslims are breaking their Ramadan fast with fish instead of meat, which has become unaffordable for many, and Mexico is trying to coordinate with the US on reducing food prices. Gasoline prices, meanwhile, have shot up past US$10 a gallon in Hong Kong, and the International Energy Agency is warning of a global energy crisis.” Since fertilizers are produced from petroleum products, the latter shortages also exacerbate agricultural food supplies.
In its budget presentation, the government had already allocated $5billion to deal with the threat to the livelihoods caused by the spike in cost of living especially to those in the lower income brackets. Before the Ukraine disruptions, the government had announced a welter of measures to put money directly into the pockets of the disadvantaged. These included the removal of VAT on water and electricity and a freeze on their prices. A $30,000 school uniform cash grant and a 10% increase in pensions would also have been useful. On the supply side, the government has introduced farmers’ markets in several locations in the country so as to remove the middlemen and their markup between farmers and consumers.
However, these are all short measures to deal with the emergency nature of the inflationary pressures. What is needed beyond them are medium- and long-term responses to make our economy more resilient and less subject to the vagaries of international disruptions. With Guyana now becoming an petroleum producer, the government should grant approval (subject to all legal requirements, of course) to one or more of the six applications for modular refineries that have been received according to reports. Previously, there were concerns raised about the polluting possibilities of such a venture but the vulnerability of our populace to the impact of fuel price increases outweighs these.
In the medium term, the government has already presciently launched a CariCom food security initiative. President Ali, who is the CariCom lead in Agriculture announced a “CARICOM Sustainability Agriculture Credit Facility” that will be offering up to US$100 million in financing through Republic Bank for the development of the agriculture sector. Within five years the initiative aims to satisfy 25% of CariCom’s US$6Billion food bill – which includes ours. Longer term, the gas-to-shore project should not only supply cheaper natural gas but also the production of urea that can be used in the agricultural sector.