What measures can be used to fight/curb inflation
- A tight monetary policy: for example increase in bank rate, selling securities to public, increasing reserve ratios, credit squeeze.
- Fiscal policy; this includes the reduction of government expenditure and increase taxes to reduce aggregate demand
- Reorganization of distribution channels of goods; for example rationing of scarce commodities and nationalization of major distribution channels; e.g. former Foods and Beverages which used to supply scarce consumer goods at controlled prices in Uganda
- Price and income policies this includes control of wages, rent, interest and administered prices of commodities.
- Production policy; this includes provision of subsidies to producers of scarce commodities, removing bottlenecks, and improving transport and markets.
- Import and export policies; this includes limitation of exports of scarce commodities and encouragement of importation of scarce commodities into domestic market
- Saving schemes the government can popularize saving schemes like national lottery, old age saving schemes, this reduces money supply
- Exchange rate policy; foreign exchange should be availed to sectors producing scarce essential commodities to increase their supply
- Reduction of imports; imports from countries affected by inflation can be reduced by imposing high taxes on them. Local production of raw materials should be encouraged.
- The marginal propensity to save should be increased. As more income is saved, little will be left for consumption, thereby decreasing demand and prices in general.
- Increase in credit to expand investment. Credit facilities and foreign exchange possibilities should be relaxed to encourage investment with hope of increasing output. This is an attempt to solve inflation by credit policy.
- Debt repayment/servicing should be postponed or rescheduled until such a time when inflationary pressures are checked.
- The excessive demand could be as a result of large and increasing number of consumers. In this case the government is encouraged to reduce the ever increasing population growth rates
- The government is advised to control and reduce rural-urban migration. This would reduce the pressure on commodities especially in urban area
- Labour productivity should be increased and hard works, seriousness and devotion emphasized, in order to reduce tendencies of optimism, speculation and gambling to increase output
- Promotion of technology through research in order to increase productivity
- Rehabilitation of the crippled industries so as to increase production and output
- Change of currency (currency reform) both the nationals and foreigners to regain public confidence in the legal tender.
CATEGORIES Economics
TAGS Dr. Bbosa Science
