Friday, March 24

Causes of inflation in the country is physical indiscipline, Sabally says

Pinterest LinkedIn Tumblr +

By: Nyima Sillah

Momodou Sabally, an Economist/Statistician has said that the causes of inflation in this country are mainly physical indiscipline. Saying that the government is spending beyond its means.

He noted that what this cause is macroeconomic instability because the government is borrowing too much from the domestic economy and that goes to feed into inflation.

In an interview with The Voice, Sabally noted that when inflation happens, the domestic currency also depreciates as people prefer to save their money in foreign currency. And that as a small open economy, this exchange rate passes through feeds into prices in the country which has caused the rise of inflation.

He pointed out that the floor base of inflation was open when the government under the former Finance Minister made a gargantuan fifty percent increase in civil servants’ salaries.

“I advised them against that and what happened, they kept on borrowing, while domestic debt is still growing, increase taxes on companies like Julbrew that lead to the closure of that company.

Heavy borrowing and high taxes cause inflation in the economy. The recent increase again in the public servants’ salaries further worsens the inflationary spiral the wage-price inflationary spiral that is happening in the country,” he disclosed.

However, he went on to say, The Governor of the Central Bank has recently announced stringent monetary policy measures. Sabally said “but that is not enough because monetary policy is not as effective as physical policy in terms of controlling inflation in this country. What the government is doing, is taking one step forward and two steps backward and the net effect is going to be negative.”

Mr Sabally, however, suggested that if the government is serious about tackling inflation, they need to institute physical discipline, and reduce expenditure, especially expenditure on politically ululated wide elephant projects that are destabilizing the economy.

“Physical discipline needs to be restored, unfortunately, this government is not showing us any sign towards physical discipline and that is the only way we can restore the balance in the economy on the top ban on inflation,” he said.