MPA 602: Public Policy & Administration

Posted: May 5th, 2020

MPA 602: Public Policy & Administration
~2 minutes
Assignment Task

Question:
Provide a critical analysis of the Minister of Finance’s Statement to the National Assembly entitled “On Cushioning the Impact of Rising Inflation on Households and the Economy”. Suggest at least two (2) policy alternatives to any of the decisions of government documented in
the address.

Instructions

i) Length: 5-8 pages
ii) 1.5 spacing.
iii) Font Size 12
iv) Font type: Times New Roman
v) All pages must be numbered.
vi) Use either the APA or Harvard style of Referencing (stick to the selected style throughout)
vii) All sources used must be cited properly.
viii) PLAGIARISM will attract a zero mark.
ix) References must be presented on a separate page.

Introduction:

The Minister of Finance’s Statement to the National Assembly entitled “On Cushioning the Impact of Rising Inflation on Households and the Economy” is a crucial policy document that addresses the challenges faced by households and the economy due to inflation. The statement outlines various policy measures adopted by the government to mitigate the adverse effects of inflation. This paper provides a critical analysis of the Minister of Finance’s statement and suggests two alternative policies that could enhance the government’s efforts in addressing the inflationary pressures.

Critical Analysis:

The Minister of Finance’s statement highlights the government’s efforts in cushioning the impact of rising inflation on households and the economy. The government has taken various measures, including fiscal and monetary policy measures, to contain inflation. These measures include the reduction of the budget deficit, the introduction of targeted subsidies, and the tightening of monetary policy. However, a critical analysis of the statement reveals several gaps that need to be addressed.

First, the statement does not provide a clear strategy on how the government plans to address the root causes of inflation. The statement only focuses on the short-term measures that the government has implemented to mitigate inflationary pressures. The government needs to address the structural issues that contribute to inflation, such as weak institutions, corruption, and supply-side constraints. For instance, the government should address supply-side constraints, such as inadequate infrastructure, which contributes to high transportation costs and ultimately high prices of goods and services.

Second, the statement does not address the social and economic implications of inflation. Inflation has a significant impact on the purchasing power of households, particularly those that depend on fixed incomes. High inflation rates reduce the disposable income of households, leading to a decline in their standards of living. Additionally, inflation may lead to a decline in investment and economic growth, leading to job losses and increased poverty levels. Therefore, the government needs to adopt policies that address the social and economic implications of inflation.

Policy Alternatives:

Alternative 1: Address Supply-Side Constraints

To address the supply-side constraints contributing to inflation, the government should invest in infrastructure development. The government should prioritize the construction of roads, railways, and ports to reduce transportation costs. This would make goods and services cheaper, reducing inflationary pressures. Additionally, the government should invest in the energy sector to address the energy deficit that contributes to the high cost of production. This would increase the supply of goods and services, reducing inflationary pressures.

Alternative 2: Social Safety Nets

To address the social and economic implications of inflation, the government should introduce social safety nets to cushion vulnerable households from the adverse effects of inflation. The government could introduce targeted cash transfer programs to support households that are most affected by inflation. Additionally, the government could introduce subsidized basic commodities, such as food and fuel, to reduce the cost of living for households. These policies would reduce the impact of inflation on the standards of living of households.

Conclusion:

The Minister of Finance’s statement outlines various policy measures adopted by the government to mitigate the adverse effects of inflation. However, a critical analysis of the statement reveals several gaps that need to be addressed. The government needs to address the structural issues that contribute to inflation, such as weak institutions, corruption, and supply-side constraints. Additionally, the government should adopt policies that address the social and economic implications of inflation, such as social safety nets. The two policy alternatives suggested, addressing supply-side constraints and introducing social safety nets, could enhance the government’s efforts in addressing the inflationary pressures.