Effect of inflation in Uganda

Positive effects/advantages/merits of inflation in Uganda

• increased government revenue
• encourage/stimulates investment
• encourage entrepreneur skill
• promotes hard working
• increased level of industrialization/import substitution industrialization
• leads to increased labour supply
• increased utilization of idle resources
• debtor gain
• promotes commercialization/monetization economy
• encourages labour mobility

Negative effects/disadvantages/demerits of inflation in Uganda

• discourage saving
• discourage investment
• worsen balance of payment position
• promotes tax evasion/reduced government  revenue
• promotes speculation
• reduce real income for low salary earner
• encourage production of low quality goods
• make planning difficult
• lead to loss of confidence in local currency
• promote social vices such as immorality/crime
• lead to brain drain
• encourages income inequality
• discourages lending as creditors (lenders) get less in real terms
• leads to unemployment as some firms close.
• Government becomes unpopular
• Low standards of living