- Government to subsidise increases on flour
- 5% pay hike for government workers, retroactive to January
- $4, 000 (additional) tax free for those earning below $50,000 per month
- $20M in seeds, fertilisers, pesticides to increase food production

GIVEN escalating food prices, the government yesterday announced plans to absorb the increase in the price of flour, and said it was giving a $4,000 cost of living “adjustment” and a 5% pay hike to public sector workers.

President Bharrat Jagdeo, who announced the measures at a news conference, said he would be looking to private sector bosses to also take steps to help their employees meet growing costs for key commodities.

The $4,000 tax-free cost of living adjustment will go towards government workers, teachers, soldiers, policemen, firemen and prison officers whose basic salaries are below $50, 000. The 5% salary increase will be retroactive to January this year.

The cost of living adjustment will be added to the salaries of government workers until the end of the year, following which there will be a review.

To stave off increases in the price of bread, biscuits, and pastries, the government will bear the price increase in flour sold to 22 bakeries which control about 95% of the market. The National Milling Company, NAMILCO, had announced plans to increase the price for flour and flour products as of yesterday.

In addition, President Jagdeo said the government has also bought 200,000 one kilogramme packets of flour for sale (minus the price increase) to vulnerable groups. This sale will be carried out by the New Guyana Marketing Corporation.

He said these “transitional measures” for flour, costing the treasury $200M, are temporary, as there are indications of a possible stabilising and even partial reversal in the price of wheat on the world market in coming months, with some analysts suggesting price declines within four months.

Mr. Jagdeo also announced that under the “Grow More” food campaign, which promotes increased production by commercial and subsistence farmers, chemicals and fertilisers, along with some 600,000 packages of vegetable seeds, will be distributed across all ten regions of Guyana at a cost of approximately $20 million.

This is in keeping with government’s recognition that the phenomenon of increased food prices globally presents an important opportunity to our local agriculture sector to increase production to meet the demands of both the domestic and export markets.

President Jagdeo announced the measures in light of rapid price escalations in the world market for fuel and food commodities, and its concomitant effect on small open economies such as Guyana.

“Taken together with the other measures implemented earlier this year, we anticipate that these initiatives will make a significant contribution in helping to cushion the immediate impact of world market prices on domestic consumers,” Mr. Jagdeo told reporters at the Presidential Secretariat in Georgetown.

Mr. Jagdeo said that he will be meeting with various stakeholders including the private sector, trade unions, and religious organisations to further address the issue.

EARLIER MEASURES
Since early last year, Mr. Jagdeo said the government has been highlighting its grave concerns about the impact of the global price increases, and hosted in December, 2007 a special conference of Heads of Government of the Caribbean Community (CARICOM) to address the problem.

Over time, the government has implemented several measures that have enabled the economy to avoid serious dislocation and protected consumers in the domestic market from the full impact of these external developments, Mr. Jagdeo said.

“In devising the measures implemented, we have been careful at all times to ensure that the important objective of securing macroeconomic stability into the medium and long term remains uncompromised, while we respond to the need for short term intervention so that the important social gains that we have made are not reversed,” the President stated.

Previous interventions included measures aimed directly at increasing disposable incomes.

At the start of last year, there was an across-the-board salary increase of nine percent for all government employees, and a further five percent for teachers and members of the disciplined services, effective January, this year.

At the start of this year, the income tax threshold was moved from $28,000 to $35,000 monthly, guaranteeing a greater take home pay for workers and thereby removing some 36,000 persons from the requirement to pay income tax, at a fiscal cost of $3B.

There was also a 63% increase in old age pensions, from $3,675 to $6,000 monthly, and an 82 percent increase in public assistance to vulnerable individuals, from $2,470 to $4,500 monthly, taking the old age pension and public assistance bill to $3.3B.

Other interventions have also included several measures aimed at reducing (or containing increases in) the cost of basic goods and services to consumers and producers in the domestic economy.

There has been a progressive reduction of the fuel excise tax from 50 percent on gasoline and 25 percent on dieselene at the start of 2007, to 17 percent on gasoline and zero percent on dieselene currently. The recent initiative to zero-rate the excise on diesel is projected to cost approximately $3B.

With effect from March this year, the Value Added Tax (VAT) was slashed from another extensive list of additional items, including certain food items and other basic necessities for vulnerable groups. This measure further extended the already very comprehensive list of basic goods and services that were zero-rated since last year, and is projected to cost $1.2B.

The government has also sought to contain the impact of fuel prices and other cost escalations on electricity and water tariffs by absorbing in the public sector the overwhelming majority of the increase in the fuel bill of GPL, at a cost of several billion dollars to the Treasury. In addition, the government is investing in capital expansion and renewal by GPL, including some $780 million spent last year to purchase 10 megawatts of emergency generating capacity and providing a further $6B to be spent on additional generating capacity and transmission and distribution upgrades.

The administration has also provided some $5.8 billion in investment and financial support, including $2 billion of recurrent support to Guyana Water Incorporated last year, with similar amounts anticipated to be spent this year.

In addition, President Jagdeo noted that the government continued to invest heavily in the provision of basic social services with special emphasis on improving quality and broadening access while, at the same time, maintaining and expanding our other special intervention programmes targeting especially vulnerable groups, such as the elderly, youth, and single-headed households.