Guyana: Global pressures impacting commodities prices

Georgetown / GY. (cn) Guyana, like other countries in the Caribbean and other parts of the world, has been experiencing price increases for certain commodities as a direct result of global changes.

The price increase for certain local commodities is being blamed on the Value Added Tax (VAT) which became operational in January this year. However, many of the items which have had price changes are zero-rated and hence do not attract the 16 percent VAT. This is a global phenomenon as countries are being affected and governments are working to find ways of ensuring that consumers do not feel the full brunt of the problem – the «Caribbean Net News» in Guyana reports.

This situation is not unique to Guyana, since other countries are facing price increases for various essential food items including flour. Consumers in Caribbean countries have been affected by the rising flour prices which is due to the increased cost for wheat on the international market. This has led to Government exploring ways of reducing the burden on consumers.

Prior to the introduction of the Value Added Tax (VAT) bakeries had to absorb a ten percent consumption tax which was passed on to them by their suppliers. However, with VAT at 16 percent, bakeries that are VAT-registered and compliant are able to recover the additional cost which was not possible prior to the introduction of VAT.

The Value Added Tax (VAT) was instituted from January this year and involves a cycle of different transactions including payment of tax, claiming of input credit, and payment of refunds. In May this year, there were complaints that the price for milk and potatoes had risen but this was due to world market changes. Milk is a zero-rated item. A shortage in Australia and Argentina, due to a prolonged period of drought, caused the price for this item to increase.

The price of wheat has hit an eleven-year high on the world market amid tightening world supplies, and this has led to increases in the price of flour not only in Guyana but in other parts of the Caribbean. Consumers in countries such as Trinidad and Tobago, Barbados and Jamaica are facing greater increases for flour and associated products when compared to Guyana.

Consumers in Trinidad and Tobago in this days complained that the price of bread and baked products had increased, since there was a 15 percent rise in the price of flour. Milk prices in those islands have also risen due to international factors. Barbados also reported that the price of flour is likely to be increased for the second time this year while in St. Vincent and the Grenadines; there are changes in the prices as well. Also, last month in Dominica, consumers were grappling with an increase in the cost of food and other goods.

Corn prices in other countries have also risen, and doubled in some places. The food price index in India has risen eleven per cent in one year, and in Mexico in January there were riots after the price of corn flour went up four-fold. Corn, a staple animal feed is also in demand as an ethanol base in Canada, but the price increase for this commodity has helped fuel a 4,6-percent rise in the price of meat and a jump of 3,7 per cent in the price of milk, ice cream and cheese.

The price of corn in the United States of America has doubled over the past year. This is attributed to the promotion of bio-fuel in that country and corn plays a greater role in this industry.

In the United Kingdom, many of the same problems have been experienced with consumers paying more for flour. Bakers pay 40 GBP more per tonne of flour. But bread is not the only staple food that has been increasing, since the price of milk has gone up eleven percent, while eggs have risen by almost 18 percent.

In China, the price of eggs and meat has quadrupled in the middle of a sharp shortage while there is an acute shortage of milk and drinking water in India. Sugar is used to manufacture ethanol based alternative fuel to gasoline.

Indonesians are eating their rice boiled instead of fried in oil because high biofuel demand has made palm oil unaffordable. Palm oil futures in the region have surged 80 percent since the beginning of last year.

Italian pasta makers fear that the industry is on the brink of a crisis with a rise in the price of durum wheat which rose 30 to 40 per cent this year. Drought and the demand for wheat for use in biofuels has pushed international prices to their highest in a decade.

Also, Germans are paying more for their favourite beverage, since barley prices have doubled in two years as German farmers abandon the grain in favour of crops that can be used in biofuels.

The fast-growing corn-based ethanol sector has caused the price of corn to double in the past year as more of the grain is diverted from food and into biofuel. The cost of fuel has been rising in the past few years and this has a heavy impact on the cost of other goods and services.

The government of Guyana, in the face of these global pressures and development, says it continues to be proactive in exploring ways of mitigating the impact of these changes on domestic consumers. This is reflected in the recent moves to open the market to the importation of flour and chicken to force prices down (Source).