The rising cost of living that we are experiencing is driven by global supply chain disruptions, owing to the impact of the COVID-19 pandemic; and, more recently, this situation is now being further compounded by war between Russia and Ukraine.
The impact of the war is largely because Russia is a major global exporter of several commodities, such as wheat, crude petroleum, refined petroleum and petroleum gas. These events have ultimately led to further increases in shipping costs globally, and supply shortages of a number of traded commodities. To this end, a number of countries, including the U.S, U.K and European countries, imposed a series of economic sanctions on Russia. As a result, Russia now cannot export its major commodities to the rest of the world, except for a few countries. This has naturally created a global supply shortage of commodities such as wheat; and when there is a shortage of a commodity in growing demand, its price increases as a consequence.
This is now a new challenge in the 21st century that not only Guyana, but the rest of the world, would have to deal with, and they are going to feel the effects of these impacts – albeit, the gravity of the impact on each country might be felt at varying degrees.
Against this background, civil society groups have been suggesting to the Government that it should institute price restrictions. This, however, is really not an option, as it would be difficult, and unfair to so do to the firms that have to incur rising input costs and/or import costs for their products, and those firms would be unable to absorb such exorbitant price increases. Therefore, such costs would have to be passed on to the end consumer, unfortunately.
The Government of Guyana is very cognisant of this reality, hence has to examine a comprehensive menu of measures to cushion the impact of the rising costs. Already, His Excellency Dr. Mohamed Irfaan Ali has said there would be no increases in electricity costs and water rates. This means that the Government would continue to subsidise these essentials, so that the cost burdens are not passed on to the consumers.
Additionally, through budgets 2020, 2021 and 2022, a multiplicity of fiscal measures has been implemented; for example: the removal of VAT from electricity, water and basic food items. In budget 2022, there is also a provision of some $5 billion, among other measures, to aid in cushioning the cost-of-living increases; given that the underlying causation of the rising cost-of-living, explained earlier, is unprecedented, especially now with the Russia/Ukraine war, the world economy is in an era of deeper uncertainty.
Following a series of public consultation at the community level and with other stakeholders, His Excellency the President recently announced a series of measures to help cushion the impact, financed by the G$5 billion that was set aside in budget 2022 for this purpose, to bring short-term relief.
The long-term solutions are, of course, to pursue aggressively the major transformational projects, such as the Amaila hydro and the gas-to-energy projects, which are designed to reduce the country’s high energy cost by more than 50%. These, among the many other long-term developmental programmes that are on the Government’s agenda for implementation, would be critical in this regard.
In view of these eventualities, and provided that we are able to, as a country, resolve our major challenges, which are inhibiting a competitive and more dynamic Private Sector, we would be able to better guard against and/or minimise the impacts of external shocks such as those that we are now grappling with, in the foreseeable future.
