AFTER months of contending with high fuel prices induced by global economic conditions, Guyanese were able to breathe a sigh of relief on Monday when Senior Minister in the Office of the President with responsibility for Finance, Dr Ashni Singh, announced a significant reduction in the prices of gasoline and diesel at the state-owned Guyana Oil Company Limited (GuyOil).
This intervention is the latest in a menu of measures introduced by the People’s Progressive Party/Civic (PPP/C) government to mitigate the impact of rising global commodity prices on the local economy.
Globally, owing to the COVID-19 pandemic and the war in Ukraine, the cost of living surged this year with inflation rising to 40-year highs in some economies, according to the International Monetary Fund (IMF) in a prelude to its Economic Outlook (October edition), set to be released soon.
Luckily, Guyana, to some extent, has been able to evade the severe effects of this global phenomenon through prudent management by the government, which has contained inflation to a rate less than the global average, hovering around five-six per cent.
Even with higher capital investments to enhance public infrastructure and execute large development projects, authorities have been able to dish out measures such as the slashing of excise tax on fuel and diesel to zero; removal of VAT from agricultural inputs; disbursement of billions of dollars in targeted grants, and, more recently, the reduction of gas prices at the pump from $269 per litre to $215 per litre and diesel from $265 per litre to $225 per litre, to effectively address the rising cost of living.
The latter would—if it hasn’t already— increase the spending power of locals and make travel more affordable, reduce the cost of transportation of goods thereby reducing, in some cases, the cost of goods and increase the sale of vehicles, among other things.
Despite those and other obvious benefits that would accrue to Guyanese from a reduction of fuel prices, the A Partnership for National Unity + Alliance For Change (APNU+AFC)’s finance and economics spokesperson, Elson Low, described the initiative as a “half-hearted” attempt that would bring “little relief” to families most in need of cost-of-living support.
Many Guyanese, however, accepted this initiative wholeheartedly and turned to social media to express their satisfaction with this great relief effort.
And although many people would have liked for this to happen sooner, it is understandable that the high world market prices and other fiscal constraints restricted the government from taking that route.
Even so, there was no absence of support and relief over the past two years, and this was acknowledged by the IMF, which commended the Government of Guyana for implementing effective policies to cushion the burden of high global commodity prices.
In a report documenting the conclusions of its Article IV Consultation with local authorities, the IMF said: “Staff broadly supported the authorities’ measures to temporarily ease the burden of higher global commodity prices on the most vulnerable groups of society, given the absence of adequate safety nets.”
Further, the year 2022 aside, the IMF also welcomed the broad-based economic recovery in 2021, following a protracted political transition and the pandemic-induced recession in 2020, and the unprecedented high real GDP growth, supported by a steep rise in oil production and accommodative policies.
“Directors highlighted that the increasing oil production could help transform the economy, address development needs, and build substantial buffers to absorb shocks,” the IMF said.
This, the financial institution said, could help Guyana build up substantial fiscal and external buffers to absorb shocks while addressing infrastructural gaps and human development needs. However, increased dependence on oil revenues will expose the economy to volatility in global oil prices.
But it is a great relief that the country is on course to escape many vulnerabilities and threats since the government is taking steps to improve social welfare, diversify the local economy and create an environment that is conducive to business and educate its population.