President Ali, food choices, and the elephant in the room

Dear Editor,

President Ali’s recent comment encouraging citizens to cook their own meals instead of buying restaurant food – and the meme reactions it provoked – is a useful occasion to clarify two ideas that get conflated in almost every Guyanese debate about the cost of living. One is cost of living, and the other is the rate of inflation. Once the two are explained, several of the criticisms directed at the President turn out to be less devastating than they first appear, although a more serious problem remains, which has nothing to do about restaurants.

Inflation is a rate of change (percentage) of all prices in the economy. It measures how fast the general price level is rising over some period, usually a year. In contrast, cost of living is a level or amount of money a household needs to spend to maintain a given living standard. This spending occurs at the economy’s prevailing prices for things such as housing, transportation, entertainment and food.

Inflation typically raises the cost of living, since a higher price level means, more money is required to buy the same basket of goods. Deflation works in the opposite direction. It lowers, by definition, the cost of living given that prices are falling. But deflation is rarely a free gift. It usually comes at the high cost of cyclical unemployment and social problems, as falling prices squeeze profit margins, discourage investment, and push firms to lay off workers. No serious policy maker recommends deflation as a policy to reduce the cost of living. Therefore, the policy question is never really “how do we get deflation,” but rather how to manage the pace of price increases and the pace of income growth so that the two move together.

Other presidents have tried to shape consumption

It is worth remembering that President Ali is far from the first head of state to publicly nudge citizens toward one kind of spending over another. Guyana’s late President Forbes Burnham built an entire “buy local” ethic into national policy during the 1970s and 1980s. Subsequent Guyanese leaders have made similar calls or some version of that appeal. Prime Minister Modi’s “Vocal for Local” campaign has, for several years now, urged Indians to favor domestically made goods over imports. President Jimmy Carter’s 1977 “sweater speech,” delivered in a cardigan beside a fireplace^[1], asked Americans to turn down their thermostats to conserve energy during a natural gas shortage. His predecessor Gerald Ford had tried something similar in 1974 with the “Whip Inflation Now” (WIN) campaign^[2], urging households to consume less as a way of fighting inflation. None of these appeals were coercive, and none of them were treated, at the time or since, as an attempt to shift blame for a country’s price level onto its citizens. In that context, President Ali’s suggestion that households can economize by cooking more and eating out less is not an unusual or illegitimate thing for a president to say.

The price of success

Still, there is a structural wrinkle that deserves more attention than it has received. In a rapidly growing, oil-financed economy, the labor force is being drawn more fully into full-time wage employment, and female labor force participation tends to increase sharply during this phase of development. As more household members enter paid work, the time available for home production, including cooking, shrinks. Households increasingly substitute a restaurant meal or pre-cooked food for home-cooked meals in order to optimize their remaining time for leisure – especially single- and dual-working parents. This means the “eat at home instead” suggestion collides with a genuine constraint of limited time.

Rising incomes are themselves boosting private demand across Guyana, quite apart from any government program. When that income-driven demand growth is combined with the government’s own massive fiscal footprint – financed by oil revenue and a rapidly expanding public investment program – the collective effect places significant pressure on prices, particularly for prices of non-tradable services such as rent, entertainment, legal services, local transport, and others. Some readers might recall that I have consistently argued for over a decade that Guyana’s coastal ecology diminishes the productivity of physical capital, causing a slow response in the construction of classic non-tradable goods such as roads, houses and general buildings. The increase in prices comes from the fact that the economy cannot expand this domestic non-tradable production as fast as the demand is rising. Put differently, this is the price of success. An economy growing at the pace of Guyana’s non-oil growth rate will generate cost-of-living pressure almost as a byproduct of the growth itself. Pretending otherwise does not help us to address the elephant in the room.

What the government has done, and what it should do next

To be fair to the Ali administration, it has not been passive when it comes to price increases. Zero-rated VAT on key food items and household necessities has been in place since Budget 2021. VAT has also been removed on fertilizers, agrochemicals, pesticides, and farm machinery, directly lowering production costs for farmers. Freight charges have been benchmarked to pre-pandemic levels for tax purposes since 2021. The government has noted that these measures have saved consumers tens of billions of dollars. Excise duty on gasoline and diesel has been removed. Electricity and water charges have had VAT stripped out, and water costs were cut outright.

The President’s proposal to build out farmers’ markets across the country is, on its own economic merits, a good one. Cutting out layers of intermediation between farm gate and consumer is one of the more reliable ways to narrow the gap between what a farmer receives and what a shopper pays.

I would go further, though, and suggest the government also explore a proper food buffer stock system, one that combines a smart mix of imported staples with local farm and poultry produce. A well-designed buffer stock can smooth out seasonal and weather-driven supply shocks in a way that a farmers’ market alone cannot, since farmers’ markets still leave prices exposed to a bad harvest or a shipping disruption. Guyana’s massive oil revenues provide it a rare fiscal capacity to build and maintain such a system, and it would complement rather than replace the farmers’ market idea.

What is genuinely beyond the government’s control

Some of the current price pressure has nothing to do with Guyana. The unwinding of globalization, the reshoring of supply chains, and the tariff wars launched under the Trump administration have all raised the landed cost of imported goods and inputs across the world. As a classic small open economy, Guyana is a price taker in the international markets. There is very little that any administration can do about the underlying global price of a container of fertilizer or a barrel of imported wheat, beyond what has already been tried through freight benchmarking and VAT relief.

The Iran war has made this exposure concrete rather than abstract. Roughly a third of the world’s seaborne fertilizer trade, and close to half of globally traded urea, moves through the Strait of Hormuz, and commercial shipping through that route has been severely disrupted since the war began in late February 2026.^[3] Urea prices in the United States jumped by roughly 30 percent in the war’s opening weeks, and some nitrogen fertilizer prices have since risen even further, with knock-on effects for the sulfur and phosphate inputs used to produce compound fertilizers elsewhere. The International Food Policy Research Institute has warned that a prolonged conflict could weigh on planting decisions and yields well into the next crop cycle.^[4] None of this is a Guyanese policy failure. It is an imported cost shock, transmitted through the same fertilizer and agrochemical inputs the government has already tried to cushion through VAT removal, and it belongs squarely in the “beyond our control” category alongside the broader unwinding of globalization. If anything, it strengthens the case for a buffer stock system, since it is a way of absorbing an external shock that no Guyanese food choice, home-cooked or otherwise, had anything to do with creating.

The elephant in the room

Another serious problem is domestic, not global, and it concerns the financing of the fiscal expansion itself. My own research with Dr Collin Constantine has argued that spending oil money, as such, is not inherently inflationary and/or produces a Dutch-disease effect, since that spending expands the economy’s productive and import capacity and therefore increases the supply of goods and services available to meet demand. The trouble arises when part of the fiscal expansion is financed in a way that expands the domestic money supply beyond what the growth in non-oil GDP and imports can absorb. This financing has to do with the monetization of the deficit rather than simply spending oil revenue from the Natural Resource Fund. That monetary channel is what worsens inflation and the cost of living beyond what oil-financed spending alone would produce, and it is also what likely generates the recurring excess demand for foreign exchange that periodically strains the Guyana dollar. A well-run buffer stock, financed properly and stocked with a sensible mix of imported and local food, would ease some of this pressure by increasing the supply of goods on the market.

But it cannot substitute for getting the financing of the fiscal expansion right. In a small open economy, Milton Friedman’s old warning still holds – there is no such thing as a free lunch, whether that lunch is eaten at a restaurant or cooked at home.

References

1. Jimmy Carter's 1977 sweater speech on climate still irks ... — www.washingtonpost.com ↩
2. October 8, 1974: "Whip Inflation Now" Speech — millercenter.org ↩
3. It’s not just oil and gas. The Strait of Hormuz blockage is rattling another vital commodity — www.cnbc.com ↩
4. The Iran war's impacts on global fertilizer markets and food production — www.ifpri.org ↩