No ease in price hikes

Brian FrancisBy Dr. Brian Francis


Grenada is categorically at a crossroad. Traditionally, discussions about the state of the economy would focus on macroeconomic issues such as employment/unemployment, public debt, fiscal deficit, and trade balance. Inflation, for the most part, was seen as low to moderate, thereby creating little room for panic or debate.

Today, the circumstances have changed dramatically. The end result is that the frequent and rapid increases in prices across the board are taking a toll on the Grenadian public and have become major talking points throughout the length and breadth of the country.

While it is easy to play the blame game, the truth is that no single factor or individual can be held accountable for the alarming rate at which prices for almost all of the basic goods and services consumed locally have been increasing over the past few months and years. And therefore, we as a society have to shoulder the responsibility for the price hikes that have been going on with no end in sight.

After all, the Government, through increases in taxes, fees, and other charges; has contributed to raising prices on many commodities in Grenada including the cost of airline tickets. The business sector, too, must accept their role in fostering the surge in prices by passing on excess costs to consumers and refusing to significantly lower their mark ups and profit margins.

And consumers, through their lack of willingness to maintain financial discipline and simply refuse to purchase some commodities when their prices increase, are hurting themselves in the process. But, the overall situation is not that straightforward, for it is vitally important to observe that what we as consumers in Grenada face is a serious problem – a problem based in part on the concept of the elasticity of demand.

You see, demand, like so many other macroeconomic aggregates, is influenced by several factors simultaneously. For those factors that are quantifiable, economists can easily estimate the associated elasticity of demand. Those estimates allow for the classification of goods and services as luxuries or necessities on the one hand. In other scenarios, the demand for those goods and services can be described as elastic or inelastic.

Logically, these various classifications have implications for the manner in which consumers are able to respond to price increases. For instance, when the demand for a good is inelastic, consumers would have little flexibility in responding to a price hike, leaving them to absorb the higher prices and by extension a greater expenditure on the commodity even when their consumption patterns have not changed one bit. The case of our monthly electricity bills comes immediately to mind.

In essence, therefore, the fight against continuously rising prices in Grenada has to be multi-dimensional, with inputs from the Government, businesses, and individuals. Outside of that framework, it would simply be “business as usual” and everyone in Grenada will continue to complain about increasing prices, but there would be little solutions.

And with the pending home-grown structural adjustment programme, some prices and taxes are likely to increase, making it even tougher for Grenadians to be able to afford essential goods and services. What a shame!

In the dire financial and economic situation now facing our beautiful country, I could only do like King Scholar and beg the Keith Mitchell led Administration to lead by example and prove to all and sundry that this is the perfect “time to deliver” for the sake of Grenada and Grenadians!


Dr. Brian Francis, the former Permanent Secretary in the local Ministry of Finance, is a Senior Lecturer in the Department of Economics at the Cave Hill Campus in Bridgetown, Barbados of the University of the West Indies).

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