By Osman Awad
Inflation is the rate at which the general level of prices for goods and services are rising and, consequently, the purchasing power of currency is falling. That is the definition of inflation. As a result of price increases, the purchasing power of a unit of money decreases.
Let me give you a good example. If the inflation rate is 25%, then a pack of sugar that costs $50 in a given year will cost $62.5 the next year. The currency falls require more money to purchase goods and services. The increase in general price level or in other words increase in the cost of living can be caused many different reasons. Some of them would be demand-pull inflation, cost push inflation, imported inflation, wages push inflation and other temporary factor inflation.
The question is what type of inflation Somaliland has right now? First where the inflation comes from needs to be figured out. Secondly, you need to identify the core of the disease, then find the remedy. If you do not know what type of inflation you have, you would not able to tackle it at all. As I watch the media, the commodity prices increase and exchange rates also increase. Therefore, Somaliland inflation might not be just one type. It could be a combination of inflations, types such as cost push inflation, imported inflation and temporary factor inflation.
Imported inflation would be a reduction in the exchange rate that makes import commodities more expensive. Prices will defiantly increase solely due to this exchange rate outcome. Waaheen market were closed yesterday and one of the reasons behind its closure was the problem caused by the unexpected exchange rate. In addition, the store owners could not make any sale for their imported goods. The banks and money transfer companies such as Salaama, Dahabshiil and zaad did not want to buy the Somaliland shilling. Therefore, what happened was the Somaliland shilling is chasing the American dollar.
The American dollar is insufficient in the market, which is why the US dollar became a shortage in the market. The livestock export was banned by Saudi Arabia. Secondly, the government was not able to put in more US dollar into market because of lack of hard currency. Last but not least the bourgeoisie were not willing to compromise and sell the US dollars to retailers at a reasonable rate.
The indirect taxes are the factors inflation that could be increases the goods and service. For example, if the government increases taxes rate such as value added taxes from 8% to 10% all good that are applicable will be 2% more expense. Since the president became the head of the state, he has been increase the taxes by more than 300%. By the time Riyaale left office, the current president increased any type of tax whether it was direct taxes, indirect taxes or tariff more than double.
The exchange rate of the Somaliland shillings was 3000 per 1 US dollar whereas today 1 US dollar is 9000 shilling Somaliland. It means the values of the Somaliland shilling diminished by 200% in the 7 years that the current government has ruled the country. The reason behind all these kinds of odds are the inefficiency of the government and incompetence of the president of the nation.