THE growth in the individual deposit portfolio and real estate loans in the commercial banking sector are indicative of increased levels of disposable income, reflecting twice the rate of growth recorded for the period 2020-2023 relative to the corresponding period for 2016-2019.

All in all, the resultant effect (indirect + direct impact) of all of the immediate cost-of-living measures combined―for an average household with a low-income mortgage that would be eligible for the MIR (a direct benefit), approximates to an annual average additional disposal income of $1.4 million or $117k/monthly, albeit indirectly.

In other words, in the absence of the requisite government interventions as outlined herein, designed to subside the rising cost of living situation, the average household would have incurred an additional $1.4 million annually or $117k/monthly to cover their household expenses.

This would have been an unnecessary burden on households, which would have effectively exacerbated the real impact of the cost-of-living condition.

Background: Cost of Living (COL) Interventions. Combating rising cost of living, an established global issue following the COVID-19 pandemic, which disrupted global supply chains, and compounded by the Russia/Ukraine war; requires a two-fold approach. First, it requires immediate relief measures to cushion the impact aimed at increasing disposable income.

Second, while in the case of Guyana rising cost of living is driven, in part, by the external factors globally as previously mentioned, it is also attributed to strong demand for goods and services given the increased level of production in the oil and gas sector, coupled with the aggressive national development agenda vigorously pursued by the government.

As such, rising costs, which is driven by buoyant aggregate demand in the economy, necessitates investments and making incentives available to bolster the supply side (increased production) of goods and services. This, in turn, would help to drive down prices to equilibrium levels in the medium to long term.

Countries with highest inflation rates since the pandemic as at end of 2022

Zimbabwe – 314.5% (2023 est. 193%)
Venezuela – 360% (2023 est. 187%)
Lebanon – 171% (2023 est.?)
Sudan – 257% (2023 est. 139%)
Argentina – 122% (2023 est. 72%)
Turkey – 51% (2023 est. 72%)
Suriname – 53% (2023 est. 52%)
Islamic Republic of Iran – 47% (2023 est. 46%)
Sri Lanka – 45% (2023 est. 29%)
Ethiopia – 29% (2023 est. 34%)
Ghana – 43% (2023 est. 32%)
Yemen – 15% (2023 est. 30%)
Moldova – 13% (2023 est. 29%)
Angola – 13% (2023 est. 21%)
Estonia – 10% (2023 est. 19%)

The Global average inflation rate was 8.7% (2022), estimated to slow to 5.3% in 2023. Guyana’s inflation rate remained in the low single digit range, which is projected to slow below 5% in 2023, thus remaining below the global average. In 2022, many other countries were still experiencing double digit inflation.

The World Economic Forum reported that inflation rates have doubled in 35 of 44 advanced countries over the past two years.

The Government of Guyana immediate relief measures included the following: Through the PPP/C 2020 budget, the immediate reversal of over 200 punitive taxes and fees (VAT included) implemented by the APNU Government during their tenure in 2015-2020, which had increased the tax burden on the population by over $60 billion in additional taxes annually.

This was equivalent to a tax-burden per household of an additional $300,000 annually, thereby eroding the household disposal income. Consequently, the reversal of these tax measures immediately restored $300,000 per household annually in disposable income.

Other measures include:

 Reducing the excise tax on fuel from 50% to 0% ($20-40 billion annually in foregone revenue),
 Budgetary provision for COL intervention ($5 billion),
 Absorbed increased electricity generation cost by GPL (effectively subsidising electricity cost: $17-20 billion annually),
 Absorbed increased cost by GWI (effectively subsidizing water: $2-4 billion annually),
 Part-time job programme ($10 billion annually),
 Increase income tax threshold ($5-10 billion),
 Education subvention and grants: restoration of and increasing the cash grants for school children ($15 billion annually),
 Extending the freight charges adjustment to the pre-pandemic formula ($6-12 billion annually in foregone revenue),
 Public assistance ($1 billion annually),
 Increased old age pension ($365 million more annually),
 Increased public sector wages and salaries ($33 billion increase for the period 2020-2023 or an average of $11 billion more annually), and
 Subsidy for first-time low-income homeowners, etc.

The sum total of immediate relief measures including foregone revenue to the treasury, amounts to an estimated $189 billion annually, representing 19% of non-oil GDP (2022), 6.45% of overall GDP (2022), 24% of the national budget (2023), and 63% of the Natural Resources Fund (NRF) balance as at the end of 2022.

Altogether, this translates to an additional $945,000 [indirectly] in disposable income per household annually.

Affordable Housing for Low-Income Families: The increase in the low-income mortgage ceiling is essentially to cater for low to moderate income families.

In so doing, low-income families can now access up to $20 million at lower interest rates. More importantly, the low-income housing programme by the Government is designed as a major poverty reduction tool.

As such, low-income families are able to own their own home at a cost below the market price for financing, which, in turn, empowers those families, add to their net worth, and is a key pillar upon which they are lifted out of poverty.

For example, they can then leverage the value to raise capital to build micro enterprises and enhance their overall wellbeing over time. If the government did not make this arrangement with the banks for low-cost financing, low-income families would not have been able to afford their own home if they were subject to borrowing at market rates.