5 August 2017

Ethiopia: Headline Inflation Nears Double-Digits

Photo: Addis Fortune
As car decor sales rise in Addis Abeba.

Headline inflation rose to 9.4pc in the month of July, nearly touching the double-digit mark, as the effects of mounting cereal prices rigorously reflected fully on the index of consumer prices.

The rate, which compares the past month's price with the similar period last year, has surpassed the target set to be achieved by the government in the second edition of the Growth & Transformation Plan (GTP II).

The inflation rate of the country has been growing at a quick rate over the past ten months, reaching the highest level during the last month from 5.6pc as of October 2016.

The hike in the price of cereals, largely maize, has contributed to the increase in the latest estimates of the year-on-year inflation, playing a major role in the rise of the food price index to 12.5pc last month from 11.2pc in June.

Over the past month, the price of maize exhibited a significant increase throughout the country, reaching as high as 12 Br a kilogramme in urban markets such as Addis Abeba. This is primarily due to the decline in production.

Although the country expected to harvest 30 million quintals of maize in the coming Meher Season, the Fall Armyworm, an insect which attacks crops, has already damaged 22,900ha of 71,508ha of land covered by maize.

Originating in South America, the Armyworm was first observed in Ethiopia in an irrigated maize farm land located at Yeki Wereda, Southern Nations, Nationalities & Peoples' Regional State (SNNPR).

Currently, the government is undertaking a project hailed "Emergency Response to the New Invasive FAW in Ethiopia" as a major move to control the invasion of the worm. It has already trained 277 researchers.

Meskerem Beyene, a mother of three who lives in Lideta District near Lideta Church, is one of the household heads who is baffled by the surge in the price of maize. It is unusual for her as she previously saw the market flooded by maize during previous rainy seasons, unlike the current one.

"It is unfortunate to see a hike in the price during this season," Meskerem said. "I spent no more than five Birr a kilogramme when I bought maize last year."

Two months ago, the wholesale price of maize was between 7.50 Br and 8.50 Br around Ehil Gebeya, a well-known cereal market in the city.

Tadele Ferede (PhD), an economist and policy analyst with three decades of experience, attributes the fact that the rate of inflation has neared double-digit to lower agricultural productivity seen throughout the country.

"A decline in crop production and a surge in drought must be the primary reason for the inflationary pressure," said Tadele. "This coupled with a soar in international prices of goods and depreciation of the Birr against the dollar have played a pivotal role for the inflationary pressure."

In the 2015/2016 fiscal year, the total production of cereals declined to 231.2 million quintals from 236 million quintals in the preceding fiscal year.

Tadele suggested that employing better technologies in the agricultural sector to raise crop production will help to control the food inflation in the country.

"I see the government focusing only on the distribution of fertilisers rather than advancing the sector using better technologies," he said. "Unless the government takes quick action, the surge will continue as the drought is expected to be more severe in the country."


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