Monetary Vulnerability
Vulnerability refers to the state of being open to harm or risk. Monetary vulnerability occurs when revenue is less than debt, indicating unstable revenue and increased risk. Explore the concepts of exposure to risk and the challenges in coping with vulnerabilities.
The word vulnerability means open to harm, damage and difficulty. In other words it means the state of being at risk.
Monetary Vulnerability in simple words meaning when revenue is less than debt. We can also say risk is more and revenue is unstable.
Vulnerability = Exposure to risk + Weak ability to cope with it.
There are many kinds of vulnerability
1. Social.
2. Economic.
3. Environmental.
Monetary vulnerability indicates being at the risk of problems related to the value of money, inflation and currency stability.
Causes of Monetary Vulnerability
1. Increase in inflation : The value of money gets reduced due to frequent rise in prices.
2. Currency Depreciation : When the value of foreign currency increases more than the value of the national currency.
3. Low foreign exchange reserves : Not enough foreign currency to pay for imports or debts.
Consequences
1. Purchasing power is reduced.
2. Investors lose confidence.
3. Instability of exchange rates .
Measurement of Monetary Vulnerability
Solutions :
1.Strengthening of central bank policies.
2.Promoting and managing stable inflation and exchange rate.
3.Reduction of import dependency and economy diversification.
4.Improving transparency & investor's confidence.
Examples of Monetary Vulnerability
1. Job loss without savings
2. Low or irregular income
3. High debt burden
4. Dependable on a single earner
5. No financial literacy
6. Unexpected expenses
7. Having no money left after monthly expense
8. Being excluded from formal financial systems.
9. Women with no personal income or savings.
10. Single - parent households
11. Elderly without pension or support
12. Families affected by inflation.
Psychological Aspects
1. Constant stress and anxiety
2. Avoiding investment or entrepreneurship
3. Low self worth due to financial dependance
4. Scarcity mindset
