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Ethiopia’s inflation numbers make a new turn around in upward direction (By Keffyalew Gebremedhin)

(By Keffyalew Gebremedhin)

The data released this afternoon by the Central Statistics Agency (CSA) indicates that year on year headline inflation rose to 36.3 percent in February 2012, compared to 32.0 percent in January 2012. Food inflation also rose to 47.4 percent from 41.4 percent in January and non-food inflation to 21.4 percent from 19.2 percent in January.

The CSA report indicates that most of the increases in food prices are mainly on cereals, pulses, vegetables, fruits and spices. Therefore, compared with the January 2012 data, the increases in the price of cereals was 23 percent, meat 148 percent, vegetables and fruits 217 percent, foods taken away from home 118 percent and spices by 130 percent.

It is extremely surprising that in a year the government announced a harvest of 218 million quintals of crops, representing 7 percent increases, food inflation should rise so significantly, after declines were observed in the overall rate of inflation in the previous two months.

When Agriculture Minister Tefera Derbew came on Ethiopian television to announce this glad tidings on 16 December, he indicated that this amount surpassed that of last year by 15 million quintals (Ministry foresees 218 million quintals of harvest in the upcoming season).Normally, high inflation in Ethiopia is associated with poor harvests, not in a season of good harvests. Also bear in mind that, CSA Director General Samiya Zekeria was on television days before the minister of agriculture to announce on television the good harvest. His need to reiterate the same story is evidence of how much the government has taken the yields with great satisfaction.

Having gone through the CSA data, my mind went back to February when during his submission of the government’s six-month performance report to parliament on February 8, 2012 Prime Meles Zenawi briefly touched on the success of his policies in promoting growth and curbing inflation.

Amongst the things he referred to, one was the successful implementation of the budget during the first six months of fiscal year 2011/12. Budget deficit was contained at ETB 941 million. In its Historic Deficit article, Addis Fortune noted that this has left many experts scratching their heads for inexplicability of the unexpected shift in the numbers. In other words, inflation was not thought to worsen so soon, when improvements were expected.

At that time, also buoyed by slight improvements in tax collection—in a country of 85 million people where 962 taxpayers pay 70 percent of the taxes, as recently reported in 70% of Tax Revenue in Ethiopia Collected From 962 Taxpayers —the prime minister made references to the improved measures taken in monetary policy, including reduction of borrowings from the central bank, and on the fiscal front with a view to bringing down inflation to single digit within a few months.

Unfortunately, the February 2012 inflation data that came out late by a day only signaled its refusal to give testimony to and support for the prime minister’s claims, as shown by the rise in overall inflation.

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