Bio Faces Two Big Challenges… Inflation And Unemployment

President of the Republic of Sierra Leone Dr. Julius Maada Bio

By Amin Kef Sesay

Yesterday, as was widely speculated, Government added Le1, 000 to the price of fuel sold in the country. The ostentatious reason given was the price of oil going up in the international market. This is partly true. However, the main reason is the continued devaluation of the Leone. Since March last year, the Leone has lost nearly half of its value against the Dollar, Pound and Euro. People who work at the Banks know what that means for a country’s economy and its people’s purchasing power.

Inflation increases poverty. The problem of poverty is aggravated when the prices of both imported and locally produced commodities increase. Inflation is therefore considered as the ‘cruelest tax ‘on the poor as it reduces disposable real income.

The sources of inflation include Government spending, money supply growth, world oil prices and the nominal effective exchange rate. Inflation accelerates when there is a high Government spending and high oil prices.

Another very serious challenge facing Government is that of unemployment as it causes lower economic growth. Every year, more and more young people reach working age but can largely not find the jobs because the economy is not expanding enough to absorb new workers.

The effects of unemployment include over-exploitation of available labor, reduced rate of economic growth, reduced human capacity, loss of human resources and increase in poverty levels. However, one positive effect of unemployment is the availability of adequate labor at reduced market prices.

Empirical evidence shows that unemployment and poverty go side by side. Young people after a long time of unemployment find the wrong way to earn money. To get rid from the unemployment stress, they accept alcohol or drugs. For the individual, unemployment can cause psychological distress, which can lead to a decline in life satisfaction. It can also lead to mood disorders and substance abuse. The prevalence of ‘kush’ among youths these days is not surprising.

The unemployment rate is the proportion of unemployed persons in the labor force. Unemployment adversely affects the disposable income of individuals and families, erodes purchasing power, diminishes employee morale and reduces economic output.

Root causes of unemployment include poor education and training, lack of entrepreneurship and investment and legacy of bad management of key State institutions responsible for generating economic growth.

Unemployment is caused by various reasons that come from both the demand side – the employer and the supply side – the worker. Demand-side reductions may be caused by high interest rates, global recession, and financial crisis. From the supply side, frictional unemployment and structural employment play a great role. As such, unemployment has both individual and social consequences that require public policy interventions.


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