Last Thursday we were told by the Finance Minister Dr Ashni Singh that inflation was 5.7% and food inflation 11.6% in 2021. Housewives know better: the situation is far more dire.
Here are some items as related by a very typical countryside housewife from a very typical shopping list.
Cassava previously $60 now $200 lb
Plantain $60 lb or 2lb/$100 now $200 lb
Sweet potato was $60-80 lb now $220 lb
Boulanger 3 for $200 now 3 for $500
Cucumber $100 for one
Squash was $100 now $300
Pumpkin ‘still cheap’
Orange 4 for $500
Ginger was $360 lb now $800
Celery $300 now $800
Cooking oil $320 now $580
Bread $260 now $300
Flour $420 now $480
Butter $460 now $560
Tuna $180 now $240
Bangamary was 6-7 for $1000 now 4-5 $1000
White Belly Shrimp $300 lb now 1000 lb
Whole chicken was $1200 now $1600 “and the chicken is smaller”
Duck $460 lb now $800
Beef $400 lb now $800-$1000
Sugar $60 lb now $100
Milk powder $400 a pack now $540
“I used to go with $5000 to the shop and have change. Now I end up owing the man.”
Even if we discount for a certain exaggeration, there have been numerous letters in the papers lamenting similar prices. So there is little doubt of a severe increase in food inflation. And as we know it hits the working poor the hardest since they spend a larger proportion of their income on food.
What may be behind this?
Much of the increases for imported foods can be attributed to Covid-19 which is not only biologically deadly but also has been an economic virus which has done harm to the global economy and its sophisticated trade systems. There have been long delays and cost increases for shipping while at the same time we are seeing a sharp rise in commodity prices. The Global FAO Food Price Index, which tracks food commodities such as cereals, vegetable oils, sugar, meat and dairy has reached a 10-year high with prices 28% higher than 2020.
However Covid-19 would not fully explain the rate of increases in local fruits, vegetables and fish and meat even if the inputs to produce them have increased. While the flooding of early 2021 was a decisive factor in the spikes mid-year, prices have largely not retreated and in some cases have gone up even higher. Part of this may simply be a “stickiness”, where farmers, whole-salers and vendors have left the higher price in place despite supplies going back to normal. This is not a perfect market and consumer demand is quite inelastic due to ingrained eating habits.
However this could also be part of a situation quite peculiar to Guyana at this time. In 2017 Form-er Finance Minister Winston Jordan had alluded to the phenomena known as “pre-source curse where unrealistic expectations ahead of oil production result in demands for higher wages and government spending.” While those were early days and oil production had not started, the government did face calls for wage increases which it resisted including demands from the teachers union that resulted in a brief strike and the alienation of the coalition’s base that perhaps contributed to their subsequent electoral defeat. Prices were not rising at the rate they are now, but there was an emerging sense that with all the talk of oil it was time workers started receiving decent wages.
Now we come to 2022 with oil production under-way for two years and the reality of actual cash coming into the Natural Resource Fund. This year for example we will see about $200B from the 13 government lifts, out of a total of 94. Everywhere they turn the people are inundated by talk of oil and the country’s bright prospects, including from the government which at the same time has dampened talk of significantly higher wages or even a universal basic income. So there is an understandable impatience among the population, many of whom have only known lives of grinding poverty. And while wage increases can be somewhat controlled by the government and private sector employers, prices for food items cannot. This applies to the large food importers, who despite being handed a break on freight charges for tax purposes amounting to $4B, do not appear to have passed much of these savings onto consumers. The cost of living for everyone is rising including for farmers and fishermen so they feel justified in raising their prices too. In turn the self-employed – the carpenters, masons, plumbers, electricians etc- seeing their living costs go up are also raising their rates. And so it goes – onwards and upwards – a wage price spiral that might even become hyperinflationary.
Perhaps another factor in the increased cost of living is the presence of the oil industry itself in the country and its demands on resources. While a lot of activity is hidden offshore there is the equivalent of several hotels floating out there requiring food and services from what is a small economy. The non-oil sector is actively competing to keep workers thereby increasing their costs, while onshore, demands for accommodation are already propelling housing costs higher. US$5000 per month for a home in an East Bank gated community?
So what can be done to alleviate this spiral and ease the cost of living especially for the poor? The PNCR has called for price controls on basic food items. Space precludes a detailed discussion on the benefits and dangers of such a measure. One other option would be to adjust the exchange rate so as to lower the costs of imports although here again there are complications. An increase in the income tax threshold to $100,000 would help but since so many citizens do not pay taxes it may be limited to regularised employees. On this we say no more.
What will compound the problem is the injection of an extra $169B into the economy as we see in this proposed Budget 2022. There is no doubt the urgent need for these large capital projects including a new Demerara Harbour Bridge, but they come with short term dangers. It will mean increased demands on resources and labour and the influx of several thousand foreign workers who will all require food and housing.
However one looks at it, this feels very much like inflationary times at a moment when the people are expecting a better standard of living. In this interval, the size of the chasm between the technicolour dreams painted by the government and the lived reality of working class Guyanese can also be a mea-sure of the country’s political stability. The greater the disconnect, the higher the dissatisfaction. In this respect more could have been done in this budget for the working poor but the government has chosen its path and must now look to preach patience while promising the moon.
