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Ethiopia: Meles Sees Economic Growth to Sooth Consumer Woes Gov't Lifts VAT, Tot On Imported Grains
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The Daily Monitor (Addis Ababa)
19 March 2008
Posted to the web 19 March 2008
Abera W.kidan
Addis Ababa
Stepping up the ongoing war on the economic field and boosting production is the only viable solution to the problems surrounding the commodity prices in the Ethiopian consumer market, Prime Minister Meles Zenawi said on Tuesday.
"The aim of eradicating poverty and resolving the economic problems of society can only be sustained by ensuring fast growth," Meles told Parliament on Tuesday in an update on the nation's economic performance transmitted live on state media.
"To focus on fast growth, more than anything else, therefore, is correct and necessary." Meles said the current price hike in food and non-food items weighed heavily on low-income urban dwellers.
He said efforts have been done by the government to help this section of the society survive the predicament.
He said the government was working on a short-term and long-term, sustainable remedies to help alleviate the economic concerns of the consumers but fast economic growth was the only fundamental solution that can absorb any possible economic shocks in this highly globalized economy.
He said the government has so far expended over four billion birr to subsidise some basic commodity items aimed at helping the vulnerable poor.
"Subsidies at such a high cost, even temporary, are very difficult to bear for a poor country such as ours. Obviously the 4.2 billion birr spent on subsidies could have been used to implement other development projects," he said.
Meles said there were a number of internal and external reasons behind the sky rocketing living costs.
He said a surge in oil prices, the expansion of construction project in the world which brought a high demand for cement and steel products, and the a surge in consumption in the world population-China and India in particular-played ugly faces on the local market.
Meles said however that the rural population was untouched by the current sky rocketing living costs and doesn't share the current groans voiced by the urban consumers.
The rich and the affluent, merchants and traders have not been affected, either, Meles said referring to the get-rich-quick investors who, according to some economists, have also exacerbated the problem.
Meles said there were at least two additional domestic reasons, unconnected to the international market, which, if the inflation caused by these two factors can be overcome, it will be easier to alleviate the consequences of continued shocks in the international market.
He said the significant increase in circulation of money and the deficiencies in the marketing system required particular attention and that his government has been addressing the root causes of inflation.
"The central bank will take steps to restrict the growth of money supply, and the finance ministry will take additional measures to minimise the negative impact on the economy and to nullify inflation," Meles said.
On a brighter note, Meles said the country's economy would grow 10.8 percent in 2008, despite inflation reaching 20 percent and a drought that has afflicted 9 million people.
"Like the last few years, we are being successful," he told parliament. Meles said exports would rise by 32 percent, but did not give details. Ethiopia's economy has grown at an official rate of 10 percent annually for the last five years.
Meles said the Police were investigating allegations that fake gold had been sold to the National Bank of Ethiopia, Meles said. Suspects had been arrested and would appear in court soon.
"There are people thought to be accomplices from the Ministry of Mines, which certifies the authenticity of the gold," he told lawmakers. "There are also business people and bankers involved. Those suspected of playing a leading role in the gold drama are in custody." Merara Gudina, an opposition leader and political science professor at the Addis Ababa University, said economic gains had not been translated into better living standards for many people.
"Poverty has not been reduced and experience shows that (the government's) claim of economic success was not based on data," Merara said.
Meanwhile, Meles announced a VAT alleviation imposed on imported food items.
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He said the sale of wheat to low income population on subsidized prices will continue.
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