Price control not an option to ease cost of living – Attorney General

─ reduction in duty and excise taxes to be reviewed

The significant rise in the cost of living has taken the world by storm. This eventuality is a result of the massive increase in shipping and fuel costs and shortages caused by the COVID-19 pandemic. The global issue has also been exacerbated by the ongoing war between Russia and Ukraine.

To alleviate the burden on Guyanese consumers and businesses, the government has already implemented several measures such as the farmers’ market in various regions each month, and the reduction in Value Added Tax (VAT) on water and electricity.

Attorney General and Minister of Legal Affairs, Mohabir Anil Nandlall, S.C, M.P

While indicating that more will be done, Attorney General and Minister of Legal Affairs, Mohabir Anil Nandlall, S.C, said the administration does not wish to implement a “pricing regime” that will mandate the costs for goods.

“The government can’t regulate the price that the millers, for example, purchase the paddy at, unless the government is to impose price tariffs [and]…a pricing regime, and we don’t wish to do that as a government,” the minister said.

Many governments and economists have advised against administrations imposing price constraints on commodities, as this can have a seriously damning effect on the economy.

Fiona Scott Morton, Theodore Nierenberg Professor of Economics

Renowned economist and Yale Professor, Dr. Fiona Scott Morton in an article titled ‘The Problems of Price Control’, explained that if the government is to compel businesses to sell goods at a certain price, the economy could easily be crippled.

“The imposition of price controls on a…competitive market harms society by reducing the amount of trade in the economy and creating incentives to waste resources. Many researchers have found that price controls reduce entry and investment in the long run,” Dr. Morton posited.

If the government were to pursue such an option, the controls can also reduce the quality of goods and stimulate costly rationing.

Meanwhile, local financial analyst and Managing Director of Tristar Inc., Joel Bhagwandin noted that the implementation of these price controls that sections of civil society are suggesting, would only cause a further breakdown in the provisions of goods and services.

Joel Bhagwandin, Managing Director, Tristar Inc.

“[The government] cannot restrict companies because they have to sell [goods] at a price to recoup their cost…it is not financially prudent for the companies,” he asserted.

Minister Nandlall said the government is actively reviewing other measures that can be implemented to mitigate the effects of recent global occurrences.

“We are calculating duties and excise taxes at a pre-covid rate, so as to alleviate the sharp increase that would otherwise result if we were to impose the real duties. All these mechanisms are currently being employed by the government, but it’s still a work in progress,” he noted.

In Budget 2022, $5 billion has been allocated to directly address the steady increase in the cost of living.

When the government took office in August 2020, a slew of measures was implemented to ease the cost of living. Some of these included the removal of VAT on a number of services, increase in pension, distribution of the one-off cash grant of $25,000, and the reinstating of the Because We care cash grant and an increase in the School Uniform Grant, among others.

President, Dr. Mohamed Irfaan Ali has committed to assisting, as far as possible, measures that will continue to reduce the cost of living burdens on Guyanese.