You need to have your head examined if you can’t see anything wrong with the govt crowding out the private sector in a so called middle income economy.
Mwalimu, with due respect, if you have nothing to say, don’t say it here.
GOVERNMENT OVER-BORROWING CROWDS OUT THE PRIVATE SECTOR. IF THE PRIVATE SECTOR STAGNATES ------- UNMET TAX TARGETS ----- CONTRACTION OF GDP.
You are right. But how did you expect the government to mop up all the money poured into the market during last year’s elections? how did you expect it to control the resultant inflation?
[SIZE=6]Contractionary Monetary Policy[/SIZE]
One popular method of controlling inflation is through a contractionary monetary policy. The goal of a contractionary policy is to reduce the money supply within an economy by decreasing bondprices and increasing interest rates. This helps reduce spending because when there is less money to go around, those who have money want to keep it and save it, instead of spending it. It also means that there is less available credit, which can also reduces spending. Reducing spending is important during inflation, because it helps halt economic growth and, in turn, the rate of inflation. - Investopedia