Capital Ethiopia Newspaper

Inflation soars in February denting latest gains

Ethiopia’s annual inflation rate soared to 36.3 percent in February, up from 32 percent in January and reversing latest trend of decelerating prices.
The escalation in prices during February was mainly driven by surging costs of food items. Food prices that consume up to 60 percent of an average family’s income soared by 47.4 percent in February, up from 41.4 percent a month earlier.
“In February 2012 increases were observed in the prices of cereals, pulses, vegetables and Fruits and Spices,” said a monthly consumer price indices’ report the Central Statistical Agency of Ethiopia (CSA) released this week.
Non food items also accelerated to 21.4 percent, a rise from January’s 19.2 percent.
During an appearance in parliament in February, Prime Minister Meles Zenawi appeared encouraged stating that his government expected inflation to drop to single digits when the current fiscal year comes to an end on July, 7th.
“Following the government’s measures to curb inflation, prices of various commodities are slowly improving. The inflation rate reached 40.6 percent in August but it has been slowing step by step since September and has eased to 32 percent in January. If this trend continues, it is expected to drop to a single digit by the end of the budget year,” Meles told the House of Peoples’ Representatives when he presented the federal government’s six month performance in February. According to the PM’s report, the feds have narrowed the budget gap during the six month and deficit stood at 941 million birr.
The February climb in the cost of living however has now reversed the latest easing of prices which until January, for a fifth straight month, were improving. This presents a fresh challenge for Meles who so far is unsuccessful to hold inflation to single digit, if possible at 4 percent, as set by the five year Growth and Transformation Plan (GTP).
Though disputed by the Ethiopian government, which says it is registering double digit economic growths, the International Monetary Fund (IMF) says inflation is slowing the country’s economy.
The IMF says Ethiopia in the current 2011/12 fiscal year will register a 6 percent growth, opposed to 11.2 percent forecast by the government.
“Ethiopia still faces significant challenges in particular containing still-high inflation, raising savings and meeting enormous investment needs,” says Naoyuki Shinohara, the IMF Deputy Managing Director.
Shinohara paid a visit between March 1 and 3 in Addis Ababa. During the visit he met Meles, the National Bank Governor Teklewold Atnafu and the Minister of Finance and Economic Development Sufian Ahmed.