Dear Editor,
Sometime around mid-2021, it seemed as though the PPP/C administration was sensing some economic turbulence ahead. Increasingly, the international financial institutions (IFI’s) and local press reports suggested that nationwide relief measures and in some cases, targeted measures had become necessary. In the aftermath of the turbulence, The Economic Commission for Latin America and the Caribbean (ECLAC) chose to describe recession as ‘a Rocky Period.’ Acknowledgement of the period of reduced economic activity was exemplified, in ECLAC’s ‘Preliminary Overview of the Economies of Latin America and the Caribbean 2021.’ That period was characterized by ‘a sharp deceleration of growth, low investment and productivity and slow employment that increased inflationary pressures and reduced fiscal space, increased inflationary pressures and financial imbalances.’ (GC 13.1.’21)
As regards Guyana, the negative economic consequences of the pandemic, coupled with rising unemployment and underemployment in the sugar belt in particular, and in certain administrative regions of the country in general, was evidenced by a severe impact on consumer spending as well as wholesale and retail business. Compounding the situation was the Russia-Ukraine war, its impact on the global supply chain, steep inflation, rising fuel costs and increases in international transport. In our ‘neck of the woods’, it was the Guyanese working people who were the hardest hit by the high cost of living. The ‘rocky period’ at home and abroad notwithstanding, President Ali in his 2022 New Years’ message declared that after “just sixteen months in office, economic growth was restored while the non-oil economy was lifted out of a contraction of over 7 per cent in 2020 to positive growth of 18.5 percent”.
The President’s reference to restoration of the growth rate was obviously based on the CDB’s prognosis as regards the performance of Guyana’s oil sector. Reflecting on the region’s performance in 2021, the Caribbean Development Bank (CDB) in early February 2022, sought to inject a positive perspective. The bank stated that Guyana had been ‘recognized as a major force that propelled the region’s economic growth in 2021.’ The bank declared that ‘the (region’s) average growth rate of 2.7 per cent was driven by Guyana which recorded 19.9 per cent.’ According to the Bank, the regions ‘projected out turn (for 2022) is dominated by Guyana which is expected to grow by 47.5 percent …’ (K/N 2/2/‘22). Obviously, the bank’s projection is premised on the anticipated increase in productivity by Guyana’s oil sector.
What the Bank did not say was that while the conventional formula for success rests on economic growth, economic growth does not necessarily translate into less poverty. Nowadays, economists argue that growth is an insufficient measure for human development. This is true because while there has been growth at a global level, millions around the world live in poverty or die daily from hunger and starvation. In early March 2022, the IMF declared that ‘The poorest will be the hardest hit across Latin America and the Caribbean by the economic fallout from Russia’s invasion of Ukraine. High inflation, especially food inflation affects the poor in our region the most…More social spending might be a tall order for governments facing higher borrowing costs and stretched fiscal positions after two years of lockdown…’ (S/N 17.3.’22).
In June 2022, ECLAC in a policy brief declared; ‘What is needed without delay is to sustain the welfare of the poorest sectors. Food security must be a priority… and energy security is essential to make progress …’(K/N 7.6.’22). And in an Op-Ed published two weeks later, ECLAC revealed that ‘Latin America and the Caribbean has been thrown into its worst economic recession in 120 years with more than one third of its 650 million population now living in poverty.’(GC 16. 7. ‘22). Meanwhile, the Managing Director of the IMF, during a visit to Barbados, warned of “crisis upon crisis” that has already started to affect the region…’we are now faced with another set of difficult challenges adding to an already burdened region.” (K/N 15.6. ‘22).
And the World Bank in its first Systematic Country Diagnostic’ (SCD) titled, ‘A pivotal moment for Guyana realizing the opportunities’ opined; ‘Policymakers … have to balance the critical tradeoffs between spending, investment and savings. The Bank further stated that ‘Guyana was among Caribbean countries that faced worrisome levels of food insecurity (S/N 18.6. ‘22). In a July 2022 update of the World Economic Outlook, the IMF said ‘economic prospects had darkened significantly. Poor countries are already struggling to cope with a food crisis … fueling a surge in food costs and raising fears about the prospects of famine and social unrest.’ Inflation is also rising more rapidly and broadly than the I.M.F. anticipated earlier this year. It now expects prices to rise 6.6 percent in rich countries and 9.5 percent in emerging markets and developing economies.’
Lamentably, by June of the said year, the Bank of Guyana (BOG) reported that while GDP growth projected for 2021 was set at 20.9 per cent, (the CDB’s figure was 19.9 per cent) foreign reserves had fallen below the internationally recommended levels.’ And that ‘there was an increase in prices for transportation, communication, food, education, housing and furniture’ (S/N 3.6.’21). Three months earlier, the President had declared that ‘’Every option is being examined to ease the rising cost of living and that government will convene soon a national consultation on the best options to ease the financial challenges faced by Guyanese” (GC 17.3.’21).
No doubt what the President was referring to had to do with the decline in real income. It was during that period, that repeated calls were made in the local media for a subsidy for flour claiming that ‘prices had increased for ‘cooking oil, bora to bread and chicken was not going down well with consumers..’ Sections of the media also reported that ‘food prices were continuing to rise. While some governments were at their wits end about how to cushion the effects of the ‘rocky period’ or recession, the PPP/C administration took steps to ameliorate the sufferings of the populace.
Covid-19 cash grants were extended to all Guyanese. Cash grants went to farmers, fisher folk and sugar workers. Taxes were slashed on electricity, water, medical services and educational supplies, basic food items and household necessities. The ‘We Care Cash’ grant was restored. Members of the disciplined services benefited from a one-month tax free bonus. Front-line workers in the health sector were rewarded with one-off payments while public servants’ salaries and old age pensions were increased. And 20 thousand GOAL scholarships were offered by government. A World Bank survey conducted in 2021 in 24 Latin American and Caribbean countries, put Guyana ‘within the top three bracket of countries whose citizens benefited from emergency and or regular transfers as a cushioning mechanism during the pandemic’ (S/S 5/12/21).
Later on, government announced that G$5bln will be allocated for the creation of 11,000 part-time jobs in five administrative regions of the country. Earlier, the Bank of Guyana (BOG) in its report for the first quarter of 2022, highlighted that government spending on new capital projects increased by a whopping 170.5 percent. Public expenditure for critical infrastructure projects resulted in an increase in employment. Government also announced fertiliser support to farmers in order to cushion the impact of the rising cost of fertilizer on farmers and to limit the trickle-down effect on food prices by purchasing 1 billion dollars’ worth of fertilizer for free distribution to farmers. In retrospect, it was perhaps based on the Bank’s analysis that President Irfaan Ali in his 55th Independence Anniversary address to the nation, sought to assuage the populace by declaring; “Every person in the local society, now has real opportunity to grow and develop…”
In respect to revenues accrued from oil and gas he assured that ‘the cost of electricity, for instance, must be reduced for both business and household consumption.” (GC 26.5.21) More recently, government announced that there would be a $3 billion supplementary budget to address issues affecting indigenous communities. According to S/N editorial of 17.7.’22; ‘It sounds like an impressive sum, but what matters is how it will be distributed, and whether in practice Indigenous communities will have the input they have been promised in the plan’. In this regard, questions have been raised whether there will be a role for the recently announced Monitoring Team for Hinterland Communities (MTHC) for the 3Bln. supplementary budget. Furthermore, the populace has been assured that there will be ‘future interventions’ to address the rising cost of living and that ‘Government continues to be extremely mindful of the realities globally and the realities domestically… and will do all that it can to alleviate the situation.’
The nation was told that government ‘had allocated some $5 billion in the 2022 Budget to cushion the effects of the rising cost of living.’ Retrospectively, it seemed as though government took the cue from the international financial institutions’ prognosis about a looming food crisis and activated the President’s agriculture portfolio for CARICOM. A plan for the region’s food security was hatched and in May 2022, a regional Agri-Investment Expo was realized with a view to reducing the region’s food import bill by 25 per cent by 2025. The government also sought to whip-up support for its call for the removal of non-tariff barriers for agricultural goods throughout the region. However, questions have been raised about the realization of government’s food security related target and which foods it intends to limit by 25 per cent for 2025.
25 by 2025 is obviously a political target. Its realization may require the establishment of Political and Economic Action Committee Engagement (PEACE) whose aim must be to engage at the political, private sector and agricultural levels with a view to ensuring inclusivity, cooperation and consensus in respect to the items that would be limited by 25 per cent. At the end of the day, the big question is, who will be the main beneficiaries of economic growth?
Sincerely,
Clement J. Rohee
