Commentaries | Sep 10,2021
Headline inflation, the indicator of the cost of living, has stagnated in the double-digit range with a slight increase in July to 15.5pc.
This is a 0.1 percentage point increase from June, which recorded a 15.4pc rate, and is the second-highest rate over the past year, according to data from the Central Statistical Agency.
July saw both food and non-food inflation rates increase slightly to 20pc and 10.3pc, respectively, from June, which registered 19.8pc for food and 10.2pc for non-food inflation.
The price of major cereals, such as teff, rice, barley, wheat, sorghum and maize, has increased in the past month, indicates the report. The price of bread has also registered a slight increase.
“The expected decline in the price of maize during the rainy season was not realised, since it continued increasing from month to month,” reads the report.
Some vegetables and pulses, such as Ethiopian kale, cabbage, tomato, green pepper, potato, horse beans and peas, showed a continued decline, according to the report.
Price increases for clothing and footwear, house rent, housing repair and maintenance, energy, household goods and furnishings, health care and transport, especially automobile transport, pushed up the rate of non-food inflation.
Even though the government has been able to mostly stabilise the inflation rate, it has shown a fast increase since May, according to Prime Minister Abiy Ahmed (PhD), who briefed members of the media two weeks ago. He also added that the country had been challenged with double-digit inflationary pressure over the past 15 years.
“Agricultural productivity was not growing at the same pace with the economy, and the population was growing,” he said. "The economic policy approach was also based on aggregate demand."
In the short term, the government is working on securing sufficient supply of wheat and oil, which are scarce and causes of inflation, ahead of time, according to the Prime Minister.
“El Niñodidn’t occur, and summer rain was good," he said, "so we expect agricultural productivity to grow this harvesting season."
However, Alemayehu Geda (Prof.), a macroeconomist and university lecturer, predicts the rate will even increase in the coming two months.
"The coming months are known for high expenditure from households," said Alemayehu. "It is a holiday season and witnesses the opening of schools."
He also said that since the harvesting season is after four or five months, there is no way that the inflation rate would go down soon.
Last fiscal year’s annual inflation rate was 12.6pc, higher than the preceding year that registered 14.4pc.
Still, the administration aims to control the inflationary pressure in the single digits this fiscal year.
“Economy is our major focus this year,” said Abiy.
Two months ago, the macroeconomic committee chaired by Prime Minister Abiy formed a task force to explore the causes of rising inflation and come up with policy recommendations to keep the rate down and control the pressure.
The six-member task force is composed of experts from the National Planning & Development Commission; the ministries of Trade & Industry, Finance and Agriculture; the Central Statistical Agency; and the National Bank of Ethiopia.
Chaired by Getachew Adem, the deputy commissioner of the National Planning & Development Commission, the task force regularly follows up on the inflation rate and conducts research to trace the cause of rising inflation and to forward recommendations to the macroeconomic committee.
Alemayehu, the macroeconomist, still says that even the current figure does not seem correct.
"Given the price of the food items in the market, the 20pc food inflation rate reported by the CSA does not seem to be accurate," he said.
Alemayehu suggests making the Central Statistical Agency an autonomous body independent from the government and having it release peer-reviewed reports.
"In that way, we can get accurate data," Alemayehu said.
PUBLISHED ON
Aug 10,2019 [ VOL
20 , NO
1006]
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