Ethiopia: Fuel Fuels Cost of Living


A strong increase has been witnessed in the cost of living after the government adjusted the price of fuel by more than 10 percent, The Reporter has learnt.

Different food and non-food items exhibited increase by as much as 10 percent after fuel price adjustments were made.

The Addis Ababa City Administration also increased transport tariffs by 22 to 25 percent, while taxi hailing service providers, including Ride, have also adjusted their initial price by 20 percent to 60 Birr.

Sources also indicate that some items, including edible oil, showed a significant increase, while there is a dearth of supply.

"While the price adjustment has been made by importers and wholesalers, we are being forced to sell the item for a price lower than what we are being charged by wholesalers," said Kemal Aman, a retailer who owns a grocery store at Mekanisa.

The price of white teff has also increased to 4700 Birr in major markets of Addis Ababa, showing an increase of 10 percent since last week.

Experts have been warning against the adjustments made on the price of fuel saying it would lead to imported inflation due to the linkage of the item with goods that are widely consumed in Ethiopia.

"An adjustment in price of fuel can directly or indirectly impact the cost of any other goods," said Demis Chanyalew (PhD), an Economist. "So the lifting of fuel subsidy will obviously bring imported inflation. It has multifaceted impacts on prices of goods and services."

On January 2020, due to an increase in international fuel price - which has inflated the import bill by 1.5 billion Birr during the last month - the Ministry of Trade and Industry cut fuel subsidy to 75 percent, while consumers are expected to cover the rest.

The government spent 24 billion Birr in fuel subsidy during the last two years.

"In neighboring countries, the retail price of fuel reaches as high as twice the value in Ethiopia. Considering this, it is rational to adjust the price of fuel, but the adjustment should be gradual since the economy is already struggling with inflationary pressure," said Demis.

According to the Central Statistical Agency (CSA), last month, headline inflation measured by consumer price index, reached 19.2 percent, while food inflation surged to 23.1 percent. Non-food inflation increased to 14.5 percent.

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