Dear Editor,
I refer to distinguished Professor Clive Thomas’s ‘Rising prices and the relief package’ in his column this week in the Sunday Stabroek.
Thomas reviewed the relief package within the context of local and global factors triggering the price rises, “discontent, disaffection and public agitation.”
Look, Guyana has no food crisis. Guyana has had no hand in the spiralling global food and fuel prices. And Guyana is not listed as one of the Food and Agricultural Organi-zation’s 37 countries in substantial need of food assistance.
Implicitly, Thomas is saying that the government’s relief package does not amount to ‘a hill o’ beans.’ Well, the distinguished Professor is wrong.
For a developing country, the government’s response to the rising global food and fuel prices rises above the hills among its parallel counterparts.
Clearly, the focal point of the government’s intervention is to cushion the scourge of the high prices on the poor, and to reposition the farm sector toward the market. And Thomas cynically acknowledges the beginnings of government’s efforts in 2007 to position itself against the growing global food and fuel prices.
Well, government has been repositioning the inherited badly battered economy since 1992, and we need to know that there was little or no financial viability until about 2000. For Thomas to do otherwise would be to reduce his analysis to a mere cross-sectional study, rather than a trend type of analysis.
Thomas will have to effect his analytic initiation from 1992 to provide a comparative perspective. Anything short of this shortchanges the analysis on Guyana’s relationship with rising food and fuel prices, and other adverse external shocks many moons ago.
He cynically refers to the mere 9% across-the-board increases against a 14% inflation rate at the end of 2007. But review the monthly inflation rate for each month in 2007, and observe in the table below that the inflation rate was under double digit for the first quarter.
Cumulative Monthly Inflation Rates
Jan. 1994=100
Georgetown (%)
Months 2007
January 6.6
February 6.9
March 7.1
April 8.3
May 10.8
June 12.2
July 13.3
August 13.5
September 13.9
October 13.6
November 13.6
December 14.0
Source: Bureau of Statistics
In fact, the average inflation rate for the year 2007 was about 11 per cent. And this average inflation rate was largely externally influenced. And so the relief package is intended to cushion the impact of inflation on a day-to-day basis, and not merely responding to some strange end-of-year inflation rate.
But other cushions, too, have been incorporated over the years to improve the people’s standard of living in the face of external shocks, simultaneously executing the developmental thrust. A few examples of cushioning follow. Government’s minimum wage today is $28,400 from $3,100 in 1992. The income tax threshold was $25,000 per month in 2006, then it was increased to $28,000 per month in 2007.
In addition, effective January 1, 2008, the income tax threshold increased from $28,000 per month to $35,000 per month, freeing up today 36,000 workers from paying taxes on their salaries; government will lose $3.2 billion in revenue in 2008 through instituting this measure.
The government’s interventions constituting the relief package were instituted at a cost to revenue; some examples of a loss of revenue now follow: zero rating on diesel – $3 billion; zero rating on VAT from March 2008 on the list of additional items – $1.2 billion; temporary cost of living of $4,000 per month plus 5% increase – $1.2 billion; GPL’s fuel bill to avoid tariffs being passed on to consumers – $7 billion per year.
And Thomas’s point about the global supply-demand imbalances largely pertaining to wheat and rice may not be appropriate. In this context, Martin Wolf of the London Financial Times noted: “The recent price spikes apply to almost all significant food and feedstuffs (see charts). Yet these jumps are themselves part of a wider range of commodity price rises. Powerful forces are linking prices of energy, industrial raw materials and foodstuffs. Those forces include rapid economic growth in the emerging world, strains on world energy supplies, the weakness of the US dollar and global inflationary pressures.”
And what Thomas implicitly is saying is that the menu of measures really is not enough to substantially increase disposable income. But what else is there to present within the resources available? The PNCR has provided its answer: street protests.
Clearly, the government’s intervention to cushion the rising food and fuel prices has to be examined against its overall developmental strategies. Clearly, as a response to rising fuel and food prices, erosion of trade preferences and other adverse shocks, the government stepped up its efforts to diversify the economy in order to maintain its competitiveness to achieve medium-term growth. Diversification and international competitiveness combined with a technology vision correspond to the government’s twin strategies of development.
But given the government’s relief package and the developmental thrust, Guyana has a great opportunity to use the global rising food prices to revolutionize agriculture. I would like to shortly say more on the global rising food and fuel prices!
Yours faithfully,
Prem Misir
Editor’s note
We do not normally publish letters that have already appeared in other newspapers. The letter above was received the day after it had been carried in both the Guyana Chronicle and the Kaieteur News, despite the fact that it referred specifically to a column in this newspaper. It is because it is a criticism of one of our columnists that we are nevertheless reproducing it here.
