Economic growth is the ultimate goal of each nation to strengthen its currency. Many policies are introduced for the said purpose. While some are proven beneficial, others leave a country in ruins. Inflation is one aspect that is beneficial for a country if wages are increased as well, but otherwise, it can be detrimental to the economy.
What is Inflation?
The economic phenomenon by which the prices of goods and services are increased, while the value of a currency declines over time, it is known as inflation. The reason why there is a decline in the purchasing power of a currency is that each unit of a currency buys fewer products. Interestingly, some amount of inflation is even considered good for the economy; however, it is only good if other variables such as unemployment and GDP remain constant.
Presently, Venezuela is not just experiencing inflation, but hyperinflation, with the inflation rate increasing by the hour. The annual inflation rate of Venezuela has gone past 200,000 percent. While the economy of Venezuela has been subject to inflation since 1983, it was increasing gradually; however, after 2014, it has been accelerating tremendously. President Hugo Chávez ruled the country for over a decade during which he did introduce programs that helped the people. Unfortunately, these came at the cost of a compromised economy because he had borrowed a huge amount of money that the country had no means to pay back, despite his financial advisors telling him about the inevitable. As Hugo Chávez was solely focused on retention of his popularity, the country was falling deep into an economic crisis. The current president of Venezuela, Nicolás Maduro, decided to make things work by printing money, and to economists, it is one of the worst ways to fix inflation. Additionally, Nicolás Maduro is following in the footsteps of the former president.
2. South Sudan
South Sudan is another country that has been experiencing high inflation at 340 percent. In 2020, 135 Sudanese pounds were equal to one USD; however, in 2022, a single dollar is equivalent to 450 Sudanese pounds. Businesses, especially small and local businesses are shutting down because there are not able to make ends meet. While the government is constantly introducing new policies to curb the problem, Sudanese are simply exchanging their savings for the American dollar on the black market. The primary reason behind this inflation and economic crisis is losing control over the oil field. Before South Sudan became independent in 2011, over half of its foreign exchange relied on the oil fields. Economists believe that the government is trying to fix the symptoms instead of the root cause of inflation.
With nearly 71 percent of the population living in poverty, it is clear that Lebanon is facing all-time high inflation. According to the statistics, the inflation rate in Lebanon is over 200 percent. A majority of the population is leaving the country, and the only people staying in Lebanon are the ones who are unable to leave. Additionally, many people have lost their money in the banks, which has led to people heading to the black market to exchange their money for a stable currency like the American dollar. While it is unethical, the legal system places a huge interest rate on the currency exchange which defeats the entire purpose. Experts believe that poor economic choices and the Beirut explosion in 2020 are responsible for this economic crisis.
Turkey is also fighting an uphill battle against inflation. The present inflation rate in Turkey is 70 percent; however, the president of Turkey, Recep Tayyip Erdoğan, is in denial of the inflation. Since he was elected as the president, the Turkish Lira has lost 90 percent of its value to the USD because of strange policies. For instance, the interest rates of the central bank are lowered. According to him, it will attract more investors, which in turn will increase the production rate and value of the Lira. Undoubtedly, it is a bizarre concept, and for this reason, many officials in the financial department have resigned.
Like many other countries on the list, Argentina is also facing an increased inflation rate, 60 percent to be exact. The fluctuation in its currency, i.e., Pesos is so abrupt that people invest their savings into the American dollar, and reserve it for emergencies. Similar to Lebanon, the government is not making this process easy, as there is a significant tax on currency exchange, plus, one citizen is only allowed USD 200 each month. Unsurprisingly, Argentines are reaching the black market, called the blue market in Argentina, to get maximum value for their money. While citizens claim that printing money is the root cause of the inflation in Argentina, it is actually the subsidies. Because education and healthcare are free in Argentina, the government must pay a hefty price to provide such services free of cost.