|
Usually when inflation hits a nation, it is the small businesses which are hit the hardest. Suddenly these businesses find that pension scheme value has diminished, equipment is more expensive to finance, overdraft repayments rise suddenly and cut into cash flow, and tax implication of increased interest payments become burdensome.
Many of African countries are hit by inflation and when it first started it seemed like a small problem. Unfortunately the problem was nipped at the bud and inflation grew unchecked and has resulted in catastrophic outcomes. One of the best examples of inflation catastrophe among African countries is Zimbabwe, where the economy is in tatters and only firm action by the government can stop the economic ravine the country has gone into.
The main determinants of inflation in African countries today is rising prices of oil and food. The demand for oil and food in African countries is far greater than the supply in international market. The two are linked because with increased fuel prices the immediate effect is that it is more expensive to produce and deliver food.
It has been seen that African households spend a high portion of their earnings on food and higher food prices hit these homes very hard. In addition, increase in food staples like rice, wheat flour and maize is forcing African countries’ governments to take emergency measures which in turn are affecting their budgets leading to further inflation.
More Articles :
|
In layman’s terms inflation is a rise in general level of prices of goods and services. The term inflation is also used to refer to increase in prices of specific goods and services. Inflation is measured as the percentage rate of change of a price index and has a dramatic effect on the economy of a nation. 
