The presidential decree justified the new taxation policy as a response to runaway inflation. “The decision on the tax policy is based on suggestions of the committee appointed by Puntland Government to recommend ways to tackle the inflation in Puntland” reads the decree.
“I have not read recommendations of the inflation committee but the reasoning might pay dividends in the long-term if Puntland Government aims to influence the exchange rate through selling of dollars to importers affected by the comparatively high exchange rate in Puntland. In my view the policy does not seem to have been properly expounded. Inflationary pressures require an urgent but considered response” says a Bosaso-based economist.
The effectiveness of this policy faces hurdles. “A liberal financial system operates in Puntland, with a dual exchange rate subsystem that uses market rates for private trans-actions but a usually overvalued rate for government transactions” argued a paper jointly published by SIDRA and the Puntland Ministry of Planning and Economic Development.
The dual exchange rate in Puntland partly fuels the rise in the competition among companies to become suppliers for the Government.
“The companies prefer the higher exchange rate because the government has no bargaining power due to the absence of tendering policies and procedures in Puntland” an accountant with a Garowe-based company told the Puntland Post.
This article first appeared in the © Puntland Post, 2020 and is republished with permission.