Policies (measures) to control inflation in developing countries
- Selling government securities to the public. This is aimed at reducing money supply and aggregate demand in the economy as a way of controlling inflation.
- Increasing direct taxes. This helps to reduce the disposable incomes of the individuals and to check on aggregate demand.
- Reducing government expenditure for example through retrenchment so as to reduce on money supply and aggregate demand in the economy.
- Maintaining political stability and security by the government through democratic governance and use of amnesty act. This helps to create a favorable investment climate hence increasing the supply of goods and services in the economy.
- Use of import and export policies. Policies aimed at restricting the exportation of scarce commodities and importation of commodities which are scarce in the economy should be promoted. This helps to increase on the availability of commodities in the economy.
- Controlling the importation of goods and raw materials from countries experiencing inflation. This is done by the government adopting import substitution development strategy to produce commodities formerly imported. This helps to check on imported inflation.
- Use of population control measures. This is aimed at reducing population growth rates through the use of appropriate family planning methods. This helps to check on excessive demand. For goods and services.
- Construction of social and economic infrastructure. For example construction of roads, rehabilitation of production units etc. This helps to facilitate the distribution of goods and services from rural to urban areas hence controlling inflation.
- Reducing government borrowing from the central bank for deficit financing. This helps to reduce excessive money supply in the economy.
- Use of price control measures for example use of maximum price legislation, rationing etc. to check on inflation.
- Use of wage freeze policies. These are aimed at controlling wages of workers through the use of wage freeze and restraint. This helps to check on the disposable incomes of individuals hence reducing money supply and aggregate demand.
- Providing investment incentives. There is need for the government to create a conducive investment climate by providing investment incentives to both foreign and local investors in form of subsidization and granting tax holidays. This helps to increase production of goods and services in the economy.
- Use of currency reforms in case the level of inflation is very high. This helps to reduce money supply in the economy.
- Use of privatization policy. This helps the private individuals to get involved in production hence increasing the supply of goods and services in the economy
- Liberalization of the economy. This allows for a number of individuals to get involved in exchange of goods and services with limited unnecessary government intervention
List form
- Reducing government expenditure
- Increasing direct taxes/increasing taxes on incomes
- Developing infrastructure.
- Providing tax incentive s to investors
- Improving the political atmosphere
- Promoting the development of the industrial sector/undertaking import /substitution industrial strategy.
- Encouraging importation from cheaper sources.
- controlling issuance of currency
- Liberalizing the economy
- Modernizing the agriculture sector
- Controlling borrowing from the central bank
- Privatizing public enterprises
CATEGORIES Economics
TAGS Dr. Bbosa Science
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