THERE is no doubt that the cost of living has been increasing over the years in Guyana. But, what we should understand is that cost of living is a global issue. Guyana is influenced both by the local and international economies because, Guyana’s economy is open to the global market where world prices for commodities, particularly global food and fuel prices, are a given. Basically, Guyana is a price-taker in this case. Hence, important to note, governments do not have full control over the changes in the cost of living.
The government of Guyana facilitates access to and consumption of both local and foreign goods and services by the Guyanese people. Generally, one can agree that Guyanese people tend to have a strong taste and preference for the foreign culture. Even with respect to basic necessities, Guyanese are likely to prefer  foreign products, from bath soaps to building materials, which generally cost more than local ones. If we take a look in most homes in Guyana, we can see that households consume many foreign-oriented products.
If government seeks to have full control over, or have a greater degree of control over the cost of living to reduce the effects of external shocks, such as rising global fuel and food prices, it will probably have to pursue policies that may be against many signed regional and international trade agreements with its trading partners; and against conditions such as liberalization of trade (the freeing up of its markets) associated with the International Monetary Fund (IMF) and the World Bank’s rules and regulations. The point is that Guyana is already integrated within the global economy and we are likely to be affected by changes in the world market.
Let’s look at a few policy examples regarding price changes that government can stabilize and regulate within our local economy. Simply, changes in commodity prices affect how much people buy.
Basically, with all things being constant and with a given income, an increase in the price of milk reduces the quantity demanded for milk or is likely to cause consumers to switch to a substitute. In this contemporary era, consumers have a wide range of choices to suit their preferences. In Guyana, this is why it is critical that the government continues to ensure a relatively stable inflation rate, which indicates the rate of increase in the general price level, so that households and even businesses are not seriously affected by the rise in prices. More so, however, at any rate of inflation not all prices are rising, but an average of all prices.
The exchange rate plays a vital role for  individuals, businesses and governments both on a micro and macro scale. The exchange rate is simply the domestic currency price (Guyana Dollars) for the foreign currency ($US). On a micro scale,  as an importer, the exchange rate can aid in determining where you buy and how much you buy and as an exporter, it can determine where you sell and how much to sell. Due to committed efforts by the Guyana government, the exchange rate has been relatively stable over the years indicating less frequent fluctuations in the rate.
VAT is another important issue. There may be a few concerns on whether VAT contributes to the high cost of living in Guyana. However, one must be knowledgeable of the fact that most of the basic food items are zero-rated for VAT, which include bread, rice, sugar, cooking oil, milk, baby formula, split peas, onion, garlic, potatoes, fruits except apples, grapes, dates, to name a few; vegetables except olives, carrots and some types of peas.
Further, others include zero-rated services such as medical services, and prescription and over the counter drugs, education services and materials (including books), electricity, water and sewerage services, locally produced building materials for construction such as sand, stone, lumber, vehicles for public officers/officials and remigrants, vehicles four years and older, computers, sports gear subject to the requirements under the first schedule of the Customs Act, and small gift parcels. In addition, items exempted for VAT include kerosene, liquid propane gas, gasoline and diesel.
One may ask, what happens then if we have a food crisis or rising global food and fuel prices? To answer this, the year 2008 gives us a perfect example. In 2008, global food and fuel prices were so high that government intervention was needed. The Guyana government cushioned the effects of the rising global fuel and food prices, by introducing a relief package including a 5% income supplementation for public service employees, and temporary cost-of-living adjustment of $4,000 monthly for public sector workers earning $50,000 and less per month.
In addition to this package were forms of tax relief including the exclusion of value added tax (VAT) on all essential food items (noting VAT was introduced in 2008); no excise tax on diesel; a reduced tax on gasoline; zero tax on kerosene and cooking gas; a flour subsidy of $200 million to cushion price increases of flour and bread and subsidies to Guyana Power & Light and Guyana Water Inc., to stem water and electricity rates’ increases; the implementation of the ‘grow more food’ campaign; administration of the US$6.9  million Rural Enterprise & Agricultural Development (READ) programme and the US$22.9 million Agricultural Export Diversification Programme (AEDP). The READ programme and AEDP are on-going programmes.
The cost of living also involves the cost of housing. With increasing government investment in the housing sector, lands or house lots and houses are becoming more affordable to everyone, especially  low-income earners. The Central Housing and Planning Authority indicated that there have been more than 94,000 Guyanese becoming land owners and home owners.
On June 22, 2009, Minister of Finance Dr. Ashni Singh indicated that as part of the loans granted under the low-income housing programme established by the government in 2001, low-income earners can access up to $3M from approved mortgage finance companies to build their homes. Also, Chairman of the New Building Society Dr Nanda Gopaul pointed out that the Society had increased its loan ceiling and lowered its mortgage interest rates. The NBS’s maximum lending rate has increased from $8M to $12M, following government’s intervention. The mortgage rates have been reduced from 7.5% to 6.95% while the mortgage interest rate for low- income homes has been reduced from 5.5% to 4.95%.