The government has no answers to local inflation

Mar 21, 2022 Features / Columnists, Peeping Tom

Kaieteur News – The rise in local prices is hurting the pockets of consumers. It has been especially hard on the poor who have seen food prices, in all categories, skyrocket.
The government’s response to this crisis has been typical but ineffective. It has employed a sliding scale for fuel taxes which has failed to stem prices at the pump which are reaching their highest ever.
Petrol is now retailing at G$243 per litre. Even during the global fuel crisis, when oil prices reached as high as US$147 per barrel, the prices at the local pump was not as high as it is today.
The government says it will subsidise electricity but it is also, at the same time, subsidising GPL’s inefficiency. It promises to also absorb any increase in the water tariffs.
Rice farmers are complaining about a decline in the price which they are receiving from millers, and at the same time are having to pay more for fertilisers. The government has waived some payments by the millers which had led to a pitiful increase of G$200, in one area, of the price which the millers are offering farmers.
The government’s strategy is clearly not working. The country’s financial gurus do not have the answers to rising inflation. They are lost and clueless.
Local inflation is not all imported. There has been an unconscionable increase in local food prices by farmers. The prices of vegetables and fruits ought not to have been subject to the high increases which are being experienced by consumers.
These are not imported items. But everyone is cashing in on the crisis, everyone other than fixed waged earners.
But consumers have the power to counter these increases. If they refuse to buy items for which prices have been unreasonably increased, they will force a reduction.
A few weeks ago, sellers of ground provisions were demanding G$300 per lb for plantains and G$250 per lb for sweet potatoes. People stopped buying and those prices have now fallen to G$100 and $75 per lb respectively.
The price of chicken has also increased, it said, due to an increase in demand. If Guyanese refuse to eat chicken for the next month, the prices will fall regardless of supply constraints.
Guyana can also learn from the mistakes of other countries in addressing inflation. In the United States, the government doled out COVID-19 relief grants to its citizens. This aggregate increase in the money supply coincided with a global supply chain problem and a contraction in production due to the pandemic.
As such, more dollars were chasing fewer goods. Inflation was inevitable. As the economy reopened, employment increased. This has added to the problems of more money chasing fewer goods and when compounded by the global supply chain problems, this further aggravated inflation.
A danger thus exists in any strategy aimed at pumping more money into the economy. Or to increase the disposable income of citizens, since this will only increase demand and drive prices up.
Yet, this is the approach which our government is taking. They have been pumping more money into the economy even without any corresponding increase in local production and at a time when shortages of imported items, such as garlic, are occurring.
This is a recipe for further price increases. Instead of trying to curb demand, the government is fuelling an inflationary spike through its excessive spending.
This year, the government increased its annual Budget by more than 40 percent. This surge in spending has already started and will further drive prices up including building materials.
What is needed, at this time, is not increased spending. The government needs to look at its spending policies since it is the largest spender in the economy and if this spending is going to drive inflation, it is advisable for the government to curtail public expenditure in non-critical areas.
However, our financial gurus believe in pumping more oil and spending more oil revenues. They do not have the economic foresight to respond to the challenge of inflation.
As such, it is left for consumers to make the right choices. That choice should be not to buy anything which is not necessary and which is being overpriced.
Consumers can force prices down by simply curbing their demand. Buy less and eat less, if possible.
And most importantly, do not buy items the prices of which have been unreasonably increased. Those who believe that they can profit off the misery of consumers need a wake-up call.
(The views expressed in this article are those of the author and do not necessarily reflect the opinions of this newspaper.)

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