Addis Fortune (Addis Ababa)
Tamrat G. Giorgis, Endale Assefa, and Tasfalem Waldyes
1 April 2008
Stifled by a runaway inflation whose year-on-year average picked to 22.9pc this month, what ails Ethiopia's economy has been a subject of fierce debate in parliament last week. Tamrat G. Giorgis and Endale Assefa, Fortune Staff Writers, and Tesfalem Waldyes, Special to Fortune, have followed the parliamentary discourse and the mixed public reaction that has followed.
The polemical battle in Parliament held on Tuesday March 18, could not have been any more attention-grabbing. Prime Minister Meles Zenawi appeared before Parliament reporting his administration's economic performance for the first half of the fiscal year; perhaps this was his shortest report ever but it was filled with plenty of confessions about what ails the Ethiopian economy. Yet he was also somewhat voracious in portraying the economy as "sound". He claimed that his administration had met its long-term objectives of gaining sustainable and speedy economic growth, for the fifth consecutive time this year.
This growth outlook has been challenged by runaway inflation, causing scepticism, if not bitterness, amongst the public. The majority, at least according to opposition MPs, are grappling with a rising cost of living.
"We keep listening to the phrase 'fast growth', while at the same time we see the emergence of the 'development hero' in rural areas," said Ali Abegaz, an MP representing a self-describing Parliamentary Group. "On the other hand and at a time when we say we have registered fast growth, the economy is expanding and the living standard is improving; these assertions, publicized widely by the state media, are in contradiction with what is happening on the ground. The cost of living has soared and the low fixed-income group is suffering in an unprecedented manner."
This is not an isolated feeling. Not only are the majority of opposition MPs of the same view but this view is also widely held by the majority of the members of the public surveyed by this newspaper late last week.
"In a country where we are now buying a quintal of teff for 700 Br, I don't think the economy is healthy," Genet Seyoum, a teacher from Sheno, told Fortune in a telephone interview.
She was one of the 53 respondents Fortune randomly surveyed last week by telephone, calling 100 people in Addis Abeba, Bahir Dar, Jimma, Awassa, Harar, Wolliso, Wukiro and Bishoftu (Debre Zeit). Almost half of the people surveyed did not follow the debate on the national TV, either when it was on live or when it was rebroadcast.
From those who followed it, the reaction to what the Prime Minister had argued was strikingly close; 51pc are convinced that the economy is fundamentally on the right track, while 49pc believe tht the current inflationary onslaught on the economy is only transitory in nature.
Prices have indeed been escalating since December 2005 and this has happened despite a series of relief measures taken by the federal government, such as subsidising the imports of oil products against skyrocketing international prices and discounted distributions of wheat and edible oil to the urban poor. For instance, the price of cereals, a basket of grains including teff, has registered a jump of 18.4pc in the year-on-year average between February 2007 and February 2008, according to a Consumer Price Index (CPI) released this month by the Ethiopian Statistics Agency (ESA), the only authoritative source on the subject. Headline inflation during this period showed an increase of 22.9pc, according to the same source.
This is a rate much higher than the annual seven per cent the government had anticipated when it designed its five-year growth and poverty reduction strategy approved by Parliament in 2006. Meles could not help but accept his administration's failure to keep inflation at bay.
"Although our objective in achiving sustinable growth is succeeding, our effort to control inflation has not yielded the desired result," he said.
The Prime Minister declared that his government has no worse enemy than inflation at the moment. Yet, Meles argued that the economy is healthy and in a good shape when looked at from a long term perspective; exports have grown by 32pc in the past eight months, he noted.
To the credit of his administration, revenues from exports reached 1.2 billion dollars in 2006/07, jumping by 18.5pc from the previous year, hence resulting in an impressive surplus of 85.1 million dollars in the balance of payment.
Unfortunately, this could not rescue the economy from a relentless inflationary pressure, a phenomenon Meles attributed to the escalating price of oil in the international market (which consumes a large portion of the nation's import bills), underdeveloped commodities market, which he said is manipulated by speculative businesses, and a sudden unpredicted monetary expansion of the economy.
For Temesgen Zewdie, a vocal opposition MP, there are a few good excuses in the long menu of justifications made by the government. According to him, the prime minister has blamed everyone, apart from himself, for the country's economic problems. Temsegen told Fortune of how the prime minister had first blamed the farmers for holding onto their produce and waiting for better prices. Then he had blamed the traders for making the same mistake of hoarding; later on, the Prime Minister argued that inflation was a result of growth itself. "And now, he blames international oil prices", Temsegen went on.
"This clearly demonstrates that the executive body has been doing nothing but come up with pretexts for the economic condition it didn't understand," said Temsegen.
Prime Minister Meles says he knows what is happening to the economy. It has caught something like the flu, he said, which is no worse than irritating.
Some people among are in the public do not buy it.
"Do you believe that?" said a stunned Tesfaye Tegegn, hairdresser from Addis Abeba. "He [the Prime Minister] has the courage to create a parallel between the cost of living and the flu."
His bitterness is shared by Yassin Ahmed, from Adama (Nazareth). "I admire the Prime Minister," he told Fortune. "However, I don't agree with what he said. The raising cost of living could be like the flu to him. It is a burning flame to us."
Although these are voices of a significant number of critics of the Prime Minister from among respondents to Fortune's questionnaires, the majority of them - close to 60pc - were persuaded by his argument that the economy is strong enough to bear the cold and survive the inflationary storm.
"What the Prime Minister said is right," Asherie Hussien, a housewife from Kaliti, told Fortune. "The problem is temporary; it will be resolved in time. The economy is growing."
An employee of a printing press, Lemma Bonger is one of the respondents satisfied with the Prime Minister's explanations. In particular he was pleased to hear Meles sympathise with the low income group in urban centres, whom he said constitute 10pc of the population that is left out of the economic growth.
"No one can deny the existence of growth," said Lemma. "The hardship is the work of greedy businesses."
The opposition, understandably, has not been generous. The toughest challenge to the Prime Minister came from Lidetu Ayalew (MP-EUDP). Despite his contention with the report that the governing party has recognized inflation and raised the cost of living to becme a major problem, and its belated move in lifting value as well as turn over taxes in a bid to boast income, Lidetu told Fortune he was not happy with the explanations the Prime Minister offered to his series of concerns.
He believes the economy, despite growth, is not sustainable; and neither is it distributed equitably to the majority of citizens. Lidetu sees an economy that suffers from "hypertension", waiting to collapse, should it be left untreated. Chief among his worries is the real source of an increased monetary circulation in the economy, a view widely shared by other economists.
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