-IDB report

PROVIDING targeted assistance to lower-income groups, including the elderly, was an important approach in microeconomic and social policies which contributed to Guyana experiencing an inflation rate lower than what was recorded globally.

This is according to the December 2022 issue of the Inter-American Development Bank (IDB) Caribbean Economics Quarterly report, titled “Headwinds facing the Post-Pandemic Recovery.”
The report focused on the six countries of the IDB Caribbean Country Department namely The Bahamas, Barbados, Guyana, Jamaica, Suriname, and Trinidad and Tobago.
The report included measures taken by Guyana and the other Caribbean governments to stem inflation and assist their economies to grow, despite external shocks and higher commodity prices on the world market.

“One important approach is to provide additional, targeted assistance to lower-income groups, including the elderly. For example, in Guyana, the government’s public assistance payments for vulnerable groups were increased from US$57 to US$67 per month, benefitting approximately 18,000 people. The Old Age Pension Programme, which benefits approximately 65,000 senior citizens, also provided a series of increases that raised the monthly payment from US$98 in 2020 to US$134 in 2022,” the report noted.

Moreover, at the micro level, to support productive sectors and vulnerable populations, the government introduced several policies.
“The excise tax on petroleum was reduced from 20 to 10 percent in January, then reduced further to zero in March. Tariffs on public utility services such as water and electricity have remained fixed, with the government absorbing higher operating costs. In addition, US$4.8 million was allocated for the purchase and distribution of fertilizer for farmers to reduce operating costs, and US$ 3.8 million was distributed in the form of one-time cash grants for households in the rural interior and riverain communities (US$120 per household),” the report noted.

According to the report, rising inflation was “imported” from commodity-price inflation that was due to external shocks, including the war in Ukraine, higher oil prices which resulted in higher fuel prices, disrupted supply chains and the COVID-19 recovery period.

Looking at the rise in commodity prices, the report noted that commodity price increases have persisted and as a result, the pass-through of these price increases inevitably has led to inflation and overall annual inflation reached the low double-digits in several countries.
However, the annual inflation rate climbed by an average of only eight percent in the Caribbean countries covered in the report, excluding Suriname, which has been coping from high inflation since the fall of 2020.

“This average inflation rate is lower than many other countries in the world. For example, according to the International Monetary Fund (IMF), average inflation for Central America, Panama, and The Dominican Republic rose to 9 percent in August 2022 (Boz et al. 2022), and average annual inflation of 12.5 percent is projected for Latin America in 2022 (IMF 2022). Part of the lower inflation in the Caribbean is due to direct actions to keep prices from rising, and these actions are discussed in this report,” the report related.

“External shocks – both the rise in commodity prices and higher international interest rates – have macroeconomic consequences for Caribbean economies. Just as Caribbean economies are emerging from the sharp recessions associated with the COVID-19 pandemic, a confluence of external shocks now complicates the recovery.”
The rise in commodity prices has both “nominal” (inflation) effects and real effects on economies across the region, with the impact varying depending on the structure of the economies, and in particular, the structure of trade.

Moreover, in some cases, depreciating currencies have contributed to inflationary pressures
“It is important to note that food prices have been rising faster than overall inflation. This is to be expected, given the rise in international prices of food as a driving force for overall inflation. However, the increase is important from a social perspective,” the report said.

The price shocks also inspired regional leaders to promote longer-term regional solutions to the dependence on imports from outside the region, notably the 25 by 25 initiative spearheaded by Guyana’s President, Dr Irfaan Ali.
The 25 by 25 aims to reduce food-import dependence by 25 percent by 2025.

“This promising objective could be achieved through a combination of increased domestic production and enhanced regional trade. Another example of the increased impetus for regional collaboration is the Saint Barnabas accord signed by the governments of Barbados and Guyana in July,” the report said.
“Finally, longer-term energy security can be enhanced by reducing dependence on imported fuel for electricity generation. Renewables offer the hope of both greater energy independence and a “greener” future.”

In its individual country summaries, the report pointed out that Guyana saw dynamic growth in the agriculture, services, and construction in 2022, based on mid-year results
“The non-oil economy is also projected to have a better-than-expected turnout of 9.6 percent for 2022 compared to 7.7 percent projected in the country’s 2022 budget. The main drivers of growth in the non-oil economy include agriculture, services, and construction, which are projected to grow by 11.9 percent, 6.3 percent, and 19 percent, respectively, all higher than originally estimated in the budget,” the report noted.

Guyana is also set to benefit significantly from increased global prices for a number of exported commodities including gold and aluminum, which is made from bauxite which is exported by Guyana, and soya-beans.

“Guyana has initiated several policy responses to address some of the challenges it faces, even in light of its increased GDP growth.  Guyana is among the governments in the region that have been organizing investment forums to promote technological improvements in agriculture and foreign direct investment,” the report said.