Current Date:

Thursday, 19 April 2018

Business Vision: Taming the Tides of High Inflation

Sudan’s inflation rate has risen to 55,6% in March compared to 54,34% in February, reported the Central Bureau of Statistics (CBoS)

However, the government introduced a number of measures to curb the rise in the dollar price including limiting cash withdrawal from banks to absorb liquidity, cracking down on black market Forex traders and restricting imports.
The government measures managed to pull back the dollar price to 34,00 pounds however economists expect a new rise in its price once these restrictions were lifted.
The most recent International Monetary Fund (IMF) report indicated that Sudan’s gross international reserves remained very low in 2017 ($1.1 billion, 1¾ months of imports).
Ordinary citizens continue to complain from cost of living increases that impaired their access to basic commodities.
Inflation could be tamed through a hard peg of the Sudanese pound to the dollar. The success of such an exchange rate–based stabilization plan would then depend on the strength of the accompanying structural and fiscal reforms.  
Taming the tides of high inflation in Sudan, in the first instance, a political will to pursue a strong and credible stabilization plan.
It will take a few more months before the government can control policies that can curb inflation. The overall inflation measures are the result of millions of pricing decision made by businesses, large and small.
The calculation of retail price index although extremely through, is always subject to error and omission.
Furthermore, the nature of the inflation process makes it very difficult to forecast, even when inflationary conditions in the economy appears too benign.
External economic shocks can make forecast in accurate, for example a sharp jump in the world oil prices or deep falls in global share prices, and both have big feedback effects through the economic system.
The exchange rate might also fluctuate leading to volatility in the prices of imported goods and services.
Inflation’s effects on an economy are various and can be simultaneously positive and negative.
Negative effects of inflation include a decrease in the real value of money and other monetary items and uncertainty over future inflation may discourage investment and savings.
High inflation may lead to shortages of goods if consumers begin boarding out of concern that prices will increase.
Positive effects increase ensuring central banks can adjust nominal interest rates and encouraging investment in non-monetary capital projects.
The control of inflation has become one of the dominant objectives of the government economic policy in many countries including Sudan. The various methods are usually grouped under three heads: monetary measures, fiscal measures and other measures.
Inflation should be fought by the government using short, medium and long term policies.