President Vladimir Putin will go down in history as one of those leaders who changed the world, although not in the way he intended. He has done enormous damage to Russia itself, from which it is unlikely to recover for a very long time, and although it is too early to predict many of the international long-term effects of his latest war, the short-term repercussions are already being felt.
The World Food Programme fears a world food crisis, and the effects of a wheat and fertiliser shortage are already being felt. Together Russia and Ukraine account for around 30% of the world’s traded wheat, while 26 countries get more than half their wheat from the two countries. In the poorer nations where it is a staple a dramatic price increase coupled with a scarcity could result in political instability.
As for fertilizer, it was already a problem even before the invasion began, but as it is the price of nitrogen fertilizer has already doubled. Russia produces potash and phosphate, two key ingredients, and both it and Ukraine have now banned the export of fertilizer. Ukraine is also a major producer of sunflower oil as well as corn, much of the latter commodity being exported to China.
The insufficiency of sunflower oil and corn on world markets will hardly affect this country very much in a direct sense, but wheat is a different story. The price of bread and roti of which Guyanese are so fond will rise dramatically. It was reported recently that President Irfaan Ali had asked that a search be made for any strains of wheat which could grow in our climate, but even supposing something were to be found, that would remain a very long-term solution. In the meantime there will be in addition the general cost of living to cope with, caused by the escalating price of energy worldwide as well as supply chain issues.
It will of course be argued that if the worst came to the worst Guyana has rice to fall back on. But rice is not insulated from rising costs on a variety of fronts. Recently the farmers in Black Bush Polder took to the streets to protest against the reduced prices the millers were paying farmers, but they also called for reductions in fuel and fertiliser costs. One miller and rice farmer, Mr Rayaadul Hakh, to whom this newspaper spoke, said that with the fuel crisis and associated expenses vessel operators were not committing themselves to a stable shipping price for any product. In addition to that transportation within the country had risen phenomenally: “We are paying more for our trucks,” he said, “at least 6000 more per truck.”
Rice farmer Mr Hardat Persaud from Wakenaam told this newspaper he was paying $1,000 for a gallon of fuel, $5,500 for a bag of urea fertilizer and $6,500 for a bag of triple fertilizer. Added to that, he had to pay a labourer $1,000 per bag to sow the paddy. One bag of each type of fertilizer is needed for one acre of rice.
Millers who met with Minister of Agriculture Zulfikar Mustapha two weeks ago said there was no commitment or timeline given to resolve the issues currently facing the industry. Subsequently the Minister indicated he would be meeting with suppliers to negotiate a reduction in the cost of fertilizer for the next crop. He should not be overly optimistic. As he himself noted, “The increase in fertilizer price, we don’t have any control over it. It has skyrocketed because natural gas has increased and when it was about to come down back you had the war started in Ukraine and Russia push up back the price.” (Part of the process of manufacturing fertilizer involves natural gas.)
Higher fuel costs will impact this country in myriad ways. Earlier this month Guyana Power and Light, for example, had said that the steady rise in the price of fuel was seriously affecting its operations, and that if the trend continued then the cost of generation would be greater than its earnings. In that department at least, the government was prepared to intervene. President Irfaan Ali was quoted as saying that water and electricity charges would not increase “by a cent”, and that the government would assume the burden of meeting the additional expenditure to “fill the gap.”
That at least will be welcome news for the consumer. The government has also reduced to zero the excise tax on gasoline and diesel. The tax on these products had been steadily decreasing throughout 2021 and had been further reduced to 10% in the Budget this year. Despite the beneficial nature of this measure, Guyana cannot control the price of fuel being imported. It was a point made by Vice President Bharrat Jagdeo during an outreach on the Essequibo Coast: “Take for example there is a tax on fuel of 50%. Now it’s down to 0% and in spite of the fact that we removed the 50% tax, the price has still gone up… We can’t remove anything else, we removed all of it,” he said.
He went on to observe: “Oil prices are now four times [what] they were in 2015 and fertilizer prices have moved up and that is why it is affecting the farmers because fertilizers are made from petroleum – oil and gas. So we are in a period now where we are seeing a high cost of living. We are sure as the production increases back across the world and we get rid of the supply chain problems and if the war abates in Ukraine that the prices are going to come down, but at this point in time it is something that the government is taking seriously because it is affecting our people and there is very little we can do about it.”
He is perfectly correct that there is very little that the government can do about these prices, and in addition it should not be thought that this situation is going to resolve itself anytime soon. We reported that in 2021 there was an increase in food prices of 11.6 per cent, but this will probably appear modest in comparison to what we might be looking at this year. And it is not just food prices; there are a whole host of items which are not produced locally but are essential to everyday living, including medications, for example. Five billion dollars was earmarked in the last Budget to address the cost-of-living increases caused by the pandemic and global supply chain hold-ups, but now we have the war in Ukraine to add to the mix, a war which has no obvious solution.
The President has said that the government was consulting with stakeholders to find the best options to deal with the various aspects of the rising cost of living. It may require some bold thinking in terms of modernising, or perhaps mechanising certain industries, like the rice industry for example. Either way, times will not be easy for the average Guyanese in the coming months.
