The Consumer Price Index (CPI) comprises four (4) sub-group indices, namely (i) food, (ii) housing, (iii) transportation, and communications, and (iv) miscellaneous.
As established in (Part I), the base year for the current CPI index is 2009. Accordingly, food prices have increased by 102%, housing prices fell by 1.4 percentage points (below the base year index), transportation and communication rose by 22%, and miscellaneous by 32.4%, since 2009. Overall, the CPI index, which is the average of the four sub-categories, increased by 43% since 2009, which means that consumer prices have increased by 43% since 2009.
Credited directly to government policies, housing prices have fallen slightly below the base year.In particular, the government’s housing policy—targets low- and middle-income families. Thehousing programme does not only include heavily subsidized costs, including concessional mortgage interest rates, but also virtually interest free loans for first time low- and middle-income home owners, viz-à-viz, the Mortgage Interest Relief (MIR) programme.
Food prices have increased, on average, by 7.3% annually over the last 14 years. This outturn is largely attributed to the direct intervention by the government, inter alia, policiesaimed at containing inflationary pressures.
It is crucial to note that had there been zero intervention by the government since 2020, consumer prices would have risen by at least 3-4 times higher than current levels. In other words, it would have cost the average consumer 3-4 times more for the same basket of goods in the supermarket or traditional market place.Altogether, the estimated cost of government’s intervention to contain inflationary pressures amounts to an estimated $322 billion annually (8.5% of GDP) in direct and indirect subsidized costs for household/consumption expenditure. Of note, this estimated value is exclusive of two key policies designed to minimize the impact of rising costs, while increasing disposable income.These are: (i) the subsidy provided to first time low-income home owners (assistance with free building materials) and (ii) the Mortgage Interest Relief policy.
Further, it is worthwhile to note that real wages have increased by 6.5 times or 539% since 2009. Notably, as shownpreviously in Part I, real wages increased by 60% in 2018 over 2017. This was on account of induced wage inflation in the petroleum sector, whereby the oil and gas companies and the tier-one subcontractors have been increasinglyrecruiting Guyanese, tripling their previous wages and salaries. Consequently, in the non-oil sectors of the economy, firms were/are forced to double and triple their salaries and benefits packages, competing with the oil and gas sector to attract local talent from the Guyanese workforce.