Addis Fortune (Addis Ababa)
3 October 2006
Prime Minister Meles Zenawi has boldly said that although the rate of inflation in Ethiopia today is in double digits (nearly 14pc) and more than what his government had accounted for in its five-year plan (seven per cent), there is no chance that it will reach hyperinflation. Hyperinflation is a state of price increase that doubles on a monthly basis.
Following are excerpts from his latest press conference, attended by Staff Writer, Issayas Mekuria, on Saturday, September 30, for two hours. Much of the conference focused much on developments with Eritrea and Somalia.
Question: You said Ethiopia's economy has grown by 10pc on average in the past three years. In July 2006, however, you had said it was 8.5pc. The problem with these numbers is that they are not supported by data. What was Ethiopia's annual crop production in 2004 and 2005? Does this mean that Ethiopia has become food self-sufficient?
Meles Zenawi: The growth rate of this budget year is still an estimate; it is still rolling. I am not aware of any revision made on our agricultural productivity, and it has been growing at an average 10pc for the past three years. In terms of total production of crops, I believe the total is in the range of 13 million tonnes or so, which means that we would simply need some 20 millions tonnes to be fully self-sufficient.
Regarding term limitation of party leaders; there was a great deal of hope by the public and I was also informed that it was briefly mentioned in your party conference. According to my information, this was decided to be postponed for unspecified time. Why is the EPRDF leadership always reluctant to limit term in office both in the party and the government?
A study was made in that regard to see if there are experiences from other countries to determine whether this would be an appropriate mechanism. The study suggested that there are few experiences of term limits within a party leadership or party membership. Nevertheless, the party [EPRDF] has made the decision to facilitate the emergence of new leadership within its ranks with special emphasis on youth and women. This could be done in the normal process of leadership elections. In this regard, there has been some changes made to leadership of the EPRDF during the current congress and we expect more changes as we go along.
One area of major dissatisfaction by people in regards to the governance quality of your party is the issue of fair and speedy justice. At the centre of this lies an ideological debate on why the EPRDF is adamant not to have an independent constitutional court with justices appointed by Parliament for life. As it is practised now, citizens who believe their constitutional rights have been violated by the state can only go to the House of Federation for constitutional interpretations; a political body that is heavily dominated by your party. After 15 years in power and over 10 years of the constitution at work, the EPRDF seems to be unwilling to admit this issue as a major handicap in the constitution. Why?
Interpretation of the constitution is an inherently political issue. Constitution is a contract among citizens, between them and government. The practice of an independent court becoming the interpreter of the constitution, which was started in the United States, was not stated for the purpose you mentioned. I would refer you to the federalist papers that were written by the originators of the United States Constitution on why they chose to have a Supreme Court to interpret the constitution. It had nothing to do with the rights of citizens as such, but with suspicions prominent [Americans] had on the mob, the mass, that might dispossess them of their property.
At a political philosophical level, we do not see any reason why our process of constitutional order would be inferior to any other. As a result, we have no plan to change what we have. People still have the right to go to court if their rights are violated by the executive. Protection of peoples' rights is clearly enshrined in our constitution.
What we do not have in this country is the court which decides whether laws passed by the legislator are consistent with the constitution. That is left to the political body [the House of Federation] composed of representatives from all the nationalities in Ethiopia. We feel this is the right and democratic approach.
Is your enthusiasm to what you recently described as a developmental state shared by your party? If that is the case, how do you think you will be successful in achieving such form of a state in the absence of a bureaucracy that his highly trained, focused, efficient and committed to your cause? Isn't it after all the capacity to implement your policies your major problem?
I would like to refer you to papers outlining the government's strategy that were distributed and debated two or three years before the last election. It refers to a developmental state in Ethiopia that is committed to development. You are right; to have an effective developmental state there needs to be an effective civil service that is committed to development. There is quite a lot of room for improvement in our civil service in this regard. But civil services do not come readymade, they are made. They are improved upon through capacity building activities.
Independent observers describe the current inflation as hyper, while your government claims it to be 10pc. Could you comment on this discrepancy?
Our target is single digit inflation, thus less than 10pc. That needs to be adjusted. The impact, however, has been heavy and disproportionately so in urban areas than rural areas because the inflationary pressure is coming from two sources. One is from global price increases on, for example, fuel prices where we can do very little for we are a very insignificant actor in that world market. We are recipients of the prices and we do not make those prices. We have tried to reduce the negative impacts of these prices by cushioning the increase in fuel prices. Even then, I must remind you that fuel prices here are lower than in many European countries in terms of prices of litres of fuel in dollar or exchange terms. That is because many European countries for environmental reasons tax fuel more heavily than we do.
The other reason has been related to the type of growth we had in agriculture. The growth in agriculture has been primarily focused on export products. That is why our exports are growing in leaps and bounds over the past three years. As result, many farmers are now buyers of cereals as opposed to being producers, thus pushing demand for cereal in the rural areas as well. Add to this the inefficiency on the agricultural marketing system. All these combined have pushed prices of cereals, particularly of teff.
That is what is affecting many people particularly in the urban areas. We need to try and resolve this by releasing some cereals from the reserve stock that we have. We have released about half a million quintals of cereals from our reserve and sold it to the market. Although I believe this plays some role in mitigating the impact on the increase in cereal prices, it is not enough.
But I can assure you that there is no hyperinflation here, and there will not be any hyperinflation.
The price of fuel in the international market is going down. Will there be price adjustment accordingly?
We make fuel price adjustments in every quarter; the last one being, I believe, sometime in August 2006. We will make adjustments, if need be, sometime in end of October or beginning of November. However, we do not make adjustments on the basis of fluctuations of spot prices of fuel. We rather do it on the basis of fuel prices on the previous quarter, the average of the previous quarter, and expectation of prices of the next quarter. There are professional bodies that project prices for a quarter on which we base our prices. I am very happy that oil prices have come down a bit over the past two weeks. I am not sure whether this relatively low fuel prices will sustain as we are in a very volatile market at the moment.
In any case, we have not yet passed the full fuel price on to the consumer. Reduction in fuel prices, therefore, would most likely reduce the costs of the government in terms of subsidy without necessarily reducing the prices. We are still subsidizing prices.
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