Since Kulmiye party has won the presidential election of Somaliland in 2010, the inflation was dramatically increasing with its term. The inflation has also affected all levels of Somaliland community from poor to rich and caused the market goods and services to gradually increase with a higher rate till all prices became unaffordable and kept growing extensively.
Moreover, the society mostly beliefs in that the inflation outbreak has begun with Kulmiye party and they are expected to take expeditious measures to halt the huge effect of inflation. Thus, despite the root causes of inflation in general and in local as well, this article works with the situation and emphasizes on the reactions of government to control the inflation and freezing not to expend anymore.
Thus, I will focus more on the fiscal measures taken by the government to control the inflation. Principally, the fiscal measures are those adopted by the government to effect the changes in purchasing power with the public and include;
- Governmentโs expenditure
- Taxation
- Debt management
- Over-valuation
Once this new government has emerged it prioritized to reduce the inflation by cutting all unnecessary expenses of the government institutions like additional stationary stuff, reduction of fuel consumption etc. and the government has taken the decision of shifting the budget from being an expenditure-based budget to capital development based one.
On the other hand, the government has recognized that the excess of purchasing power of the public is one of the root causes of inflation. Therefore, as we have practically seen, the government has imposed new rates of tax to some goods and services in the market and tried to make sure that the demand for goods and services are equal to their supply.
In addition to that, the government has tremendously controlled the public debt in order to avoid excess money supply in the market. During an event of handing over, the ex-minister of finance Mrs. Zam Zam Abdi Adan declared that there was no any debt to the government, and this reveals that the previous government was also fighting against inflation by controlling the public debt.
The government currently engages efforts to increase the value of domestic currency such as ordering telecommunication companies to change their electronic money services into domestic currency instead of foreign currency, determining the rate that should be transacted among the society etc.
Finally, the government has taken the correct measures to halt the inflation and she is required to keep on it with commitment. The rebirth of Somaliland central bankโs significant role in determining the exchange rate is also worth to be mentioned. Actually, the bank has removed the unknown driven factor of exchange rates which caused the rates to fluctuate enormously. ย And as a result, the exchange rate is under control and going down time after time.
By: Taissir Ahmed Omer