Dear Editor,
First, it was the removal of VAT on machinery. He also removed VAT on fertilizers and agro-chemicals. VAT was removed from all medical supplies. VAT was removed on hinterland travel. He then removed the duty on the additional freight charges for imports ostensibly to prevent foreign inflation from harming Guyanese consumers. Then, it was the removal of VAT on cement. That did not work. So, he has gone further to remove VAT on other construction materials. With money and prices out of the hand reach of most Guyanese, the Ali government, in another desperate move, has decided to create a home construction facility. This latter initiative is a sign that the profligate spending of the government is biting deeper into the pockets of Guyanese. A look at the money supply puts the blame for inflation squarely in the lap of the Ali government and not on foreign goods.
Between 2012 and 2013, the money supply increased by GYD11 Billion. Between 2013 and 2014, the money supply increased by GYD17 Billion. Between 2014 and 2015, the money supply increased by GYD4 Billion. In 2021, the money supply increased by GYD70 Billion. From March 2021 to March 2022, the money supply increased by GYD65 Billion, and we are yet to get to the end of 2022. The money put into the 2022 budget for spending by the government is 54% greater than it was in the 2021 budget. Instead of preparing the country to handle the higher expenditures it had in mind, the Ali government has plunged the country into an inflationary crisis in a rush to prove that it could spend money faster than the previous administration. This self-serving behaviour is tantamount to cruel and inhuman punishment of a people, especially civil servants, whose incomes are already insufficient to meet their everyday needs and who must depend on the whims and fancy of a merciless government for an increase.
The desperation of the Ali government is seen in the rapidity and frequency with which it had to abandon its rights to collect VAT revenues. This is not a common practice among governments that seek to achieve stability in their revenue collection. This is an act of desperation to control inflation that will not work if government keeps flooding the slow-producing Guyanese economy with money. The piecemeal measures of the Ali government are like the flawed thinking of the little boy who chopped off the tail of the dog in small pieces in the belief that it would be less painful for the dog. In a similar vein, the series of VAT reductions is indicative of the misunderstanding of the cause of the inflation problem and the pain that Guyanese households are experiencing.
The problem does not come from the VAT rate. It comes from the profligate spending by the government to impress Guyanese that it can pump lots of money into the economy and create whatever asset it feels like creating. The Ali government believes that it is unaccountable to the people and is spending money extravagantly. For as long as the government goes on spending lavishly, inflation will continue to eat up the VAT relief and the cost-of-living will keep rising. This reckless mishandling of the economy is typical of men who cannot manage money properly and should bring fear to the people of this country about the fate of the Natural Resource Fund. The Ali government is faced with a dilemma of its own making and does not know how to deal with it.
Sincerely
Joshua Luke