THE CHALLENGES OF FISCAL AND MONETARY POLICIES IN SOMALIA AND THEIR IMPACT ON THE GROWTH RATE OF THE ECONOMY
Mohamed Osman Mahamed
Putland State University, Somalia
ABSTRACT
The general objective of this study was to the challenges of fiscal and monetary policies in Somalia and their impact on the growth rate of the economy. Specifically, the study investigated the role of selective credit controls, Reserve requirement, government expenditure and taxation on Economic growth. The monetary and fiscal policies play a significant role in development financial sector to any country. Central banks use the monetary policy and fiscal policy as tool to control the financial body. This study was conducted through a descriptive study. In addition the study employed a survey research design in data collection. The sampling procedure of this study is used nonprobability sampling procedure particularly stratified sampling to sample 37 commercial banks sector, HAWALAS, insurance companies and central bank. This research employed quantitative data collection method whereby data was gathered by the use of closed ended questionnaires which are self-administered. The data collected was analyzed using the Statistical Package for the Social Sciences (SPSS) version 21 and results shown in terms of frequency distribution and percentages. A regression model was applied to determine the relationship between selective credit controls, Reserve requirement, government expenditure and taxation as the independent variables and Economic growth as the dependent variable. The study established a positive relationship between selective credit controls policy, reserve requirement policy and Government expenditure on Economic growth in Somalia while taxation showed a negative relationship. The R square shows that the 79% of Economic growth (dependent variable) are explained by selective credit controls, reserve requirement, government expenditure and taxation policy (independent variables). The Study recommends that The central bank of Somalia should start the implementing the monetary policies and fiscal in order to enhance the financial stability, the central should draft the commercial bank regulations in Somalia and pass the parliament in order to restart its strangeness. The study also recommends that central bank of Somalia should print the new currency, because the monetary policy is all about the money demand and supply.
