Cost of Living Escalates While Fiscal Year Comes to a Close

The rate increase was marked as the third highest in the recently ended fiscal year

Headline inflation, which has been falling for the past three months, went up to 14.7pc in June, according to the latest consumer price index from the Central Statistical Agency (CSA).

The rate is marked as the third highest in the fiscal year that recently ended, which had an average headline inflation rate of 13pc, the highest in four years.

Food inflation has shown the highest growth in years with a three percentage point increase reaching 17.9pc. Despite that, non-food inflation has fallen to 11pc from the 12.2pc of the previous month.

The prices of bread, cereals, meat, milk, cheese, eggs, butter, fruits and vegetables and spices rapidly increased compared to last month, according to the CSA.

The Agency attributes the price hikes in the non-food component such as clothing and footwear, housing repair and maintenance, energy, household goods, transport, healthcare, food and drinks to inflationary pressures of last month. The price of Khat, which has been the main cause pushing the non-food inflation rate, has declined in major producing regions in June.

The 12 months moving average inflation rate shows the longer term inflationary situation, reads the CSA’s report.

The longer-term inflationary situation has been recurring, despite the government’s plan of limiting the inflationary rates to single digits. In the 2016/17 fiscal year, the average inflation rate was 7.2pc. However, the figure started to blow up last August hitting a double-digit rate of 10.4pc, since then the rate has been hiking. The nation had the highest inflation rate of 64.2pc in July 2008 and the lowest rate of -4.1pc in September 2009.

“Unless we can have a surplus supply of basic food items, inflation will remain as a challenge,” said Prime Minister Abiy Ahmed (PhD), during the parliament session held last Friday. “A strong macroeconomic management should be applied such as controlling the broad money supply, cutting government expenditure and raising foreign currency reserves.”

Atlaw Alemu (PhD), a university professor of the College of Business & Economic at Addis Abeba University (AAU), agrees with the Premier’s stand. The main reason which pushed the inflation rate high is a supply shortage, according to Atlaw.

“Following the economic slow down in the economy, there was not that much supply of products in the market,” Atlaw said. “Yet, the demand was growing.”

Comparing Ethiopia to the region’s inflation rates, the country stands at a better position compared to Sudan and Djibouti that had 55.6pc and 55pc inflation rates, respectively, as of last month. Ethiopia has a higher rate compared to neighbouring Kenya with a single digit rate of 4.28pc, still a hike from 3.95pc of the previous month, according to an online economic indexes indicator,

However, Alemayehu Geda (Prof.), believes what is seen in the economy does not justify the figure.

“Beyond price increases, there are noticeable signs of scarcity of major consumable items such as bread and pharmaceuticals in the past two months,” Alemayehu told Fortune.

The broad money supply, which has grown by 100pc over the last decade, the recent devaluation, monopolies and shortages in the food supply are the major factors cited as reasons for the surge in inflation, according to him.

“The country needs efficient economists who can properly address the issues with policy decision basing their assessments on studies and research,” Alemayehu continued.


Published on Jul 07,2018 [ Vol 19 ,No 949]



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