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“WE HAVE A COST-OF-LIVING CRISIS” Central Bank Governor

July 22, 2023

ByElias Tegegn

Mamo Mihretu, the Governor of the Central Bank of Ethiopia, and Berhanu Nega, the Minister of Education, were among the guests of honor present at the 20th annual conference of the Ethiopian Economics Association
Mamo Mihretu, the Governor of the Central Bank of Ethiopia, and Berhanu Nega, the Minister of Education, were among the guests of honor present at the 20th annual conference of the Ethiopian Economics Association

The Governor of Ethiopia’s central bank pulled no punches in acknowledging citizens are struggling with an unrelenting cost of living surge, conceding “too high” inflation in the East African nation has climbed to unjustifiable highs.

“We have a cost-of-living crisis,” Mamo Mihretu, governor of the National Bank of Ethiopia (NBE), said in his speech at the opening of the 20th Ethiopian Economics Association International Conference on Ethiopia’s economy, laying bare that prices have skyrocketed for essentials like fuel, food and fertilizer, placing a heavy burden on household budgets.

“Inflation has risen sharply here at home and elsewhere,” he stated bluntly, pointing to surging costs for energy, food and agricultural inputs.

Mamo said that the focus of monetary policy going forward will be on bringing inflation down.

For almost two years, inflation in Ethiopia has been over 30 percent before easing for a third consecutive month to 29.3 percent in June 2023, the lowest reading since July 2021, compared to 30.8 percent in May.

Before Mamo became governor in January 2023, inflation was one of the issues that his predecessor, Yinager Dessie (PhD), was questioned about by Parliament during several sessions.

Mamo admitted that inflation is causing major cost of living increases for citizens, leaving the country with less foreign exchange reserves to import crucial goods amid soaring global prices of fuel, food, and fertilizer.

He noted that prices of essentials like fuel and food have nearly doubled in some cases in recent years. This matches reality in the market, where the price of basic items like edible oil has more than doubled in the last two years, while even locally produced items like teff have surged by a similar amount.

“Inflation has risen sharply here at home and elsewhere partly fueled by surging energy, food, and fertilizer prices,” Mamo said, citing fuel costs as an example.

This year alone, Ethiopia will spend more than USD 4.2 billion on fuel imports—twice what it spent on fuel imports two years ago.

Bringing inflation down will be the central bank’s top priority because high inflation can become “ingrained” and cause economic distortions if not addressed quickly, according to Mamo.

“The direction and objective of monetary policy from here on will focus very specifically on bringing inflation down,” he said.

While acknowledging that Ethiopia faces other economic challenges from debt to difficulties in the business environment, Mamo stressed that restoring price stability by controlling inflation will be the immediate focus of the NBE.

“The insidious damage that a high inflation regime does…is well known,” the Governor said. “Our priority for this new fiscal year is thus to reverse this state of affairs.”

The Governor’s speech aligns with plans outlined in a Central Bank tweet from two months ago, on May 29, 2023.

The tweet outlined the NBE’s priorities for the coming year, including “addressing current bottlenecks in the banking sector… modernizing monetary policies, exchange rate policies, and financial supervisory systems.”

The bank aims to modernize itself “to create a modern Central Bank focused on price stability, financial stability, and external stability,” according to the tweet.

Governor Mamo focused on reining in surging prices in Ethiopia during his speech at the conference organized by the Economics Association, but omitted a key driver fueling inflation: the swift devaluation of the local currency.

Experts say the Birr’s rapid depreciation – losing up to 25 percent of its value against the dollar annually between 2018 and 2022 – has significantly contributed to the country’s double-digit inflation.

As the local currency weakens, it made imports more costly, fueling higher prices for consumers.

Reporter

 

7 Comments

  1. While inflation is a worldwide phenomenon currently with most responsible governments taking a lot of responsible measures to curve and perhaps reverse it, countries led by a useless and ineffective government like Ethiopia are exacerbating the problem much more. Abiy and co are planting trees, building castles with donated money, selling portions of the Ethiopian airline business, embezzling, and selling donated wheat to get cold hard dollar currency to kill, jail, and maim citizens that are calling and exposing this useless government for what it is. Abiy and co are focused on suppressing any and all dissent at all costs sucking the measly budget dry and perusing frivolous quest for shiny buildings. They continue to beg the the world for more money with a pretext of trying to stabilize the country when they are the ones who perpetrate the problem they pretend to solve. Even the country in dire distress in the world currently, Ukraine, is saying that they can’t send their wheat to Ethiopia because of the ongoing war with Russia. The Ethiopian government needs to be restructured from top down if any solution is to genuinely come that could relieve poor citizens from this unbearable, unaffordable and unsustainable inflation, price gouging, corruption, theft, and ultimately the unraveling of Ethiopia as we know it. Abiy must go! Oromuma must go! Adanech must go! Shameless must go! The cure Ethiopian government must go!

  2. This is to my dear countrymen/women among our Diaspora here in USA and Canada who do business with companies in Taiwan. If are planning to travel there next week thru the end of this month I highly suggest you amend your travel plan. A very violent typhoon is heading there and will make a land fall right at the half point of that island on July 26, 2023 with a destructive speed of more than 170 Mph. Cities like Kaohsiung, Tainan, Taichung including Taipei will be on the path of this typhoon. Please make a note of this and revisit your plan. Just wanna share this you as a heads up. I hope the good people of Taiwan will fare better this time around. That island nation is my darling.

    • Mr. Engineyo- Meteorologist Ittu Aba Farda, your comments are much appreciated

      Don’t forget to Use phrases like “commies,” “alecks,” “goons,” “connivers,” “tplf,” “oromomuma,” “marxists,” “amarumma,” and similar ones as you are indentified with those traits.

      The displaced individuals in Amhara or other areas should receive support from all amhara bishops. Along with parish church leaders, these bishops are plundering the wealth of the church. They conduct themselves as though the laity are their subjects and all the wealth and property of the church is their personal property.

      • I like to keep my dear countrymen/women abreast with any adverse potential that may affect their trip plan. I know from personal experience how typhoons can be destructive and disruptive. On the day I posted my comment the typhoons was projected to land right at the half point of my darling island of Taiwan. Thank almighty today’s projection is very good news for Taiwan because it has changed its path to be south of that island. Kock on wood! If you don’t like my shoutout, all you have to do is just don’t read it. Skip it. No need to be sarcastic. That is if you are not one of those characters(phrases) you mentioned in your comment.
        Peace!!!

  3. Inflation has been bedeviling almost every country of the world since the COVID pandemic began. When is the last time you saw chicken on sale at 99 cents per lb here in the USA? It rare sight, right. The economy of every African country has been bludgeoned by inflation/hyperinflation triggering riots and coup d’etas. Asia, Latin America, Oceania, you name it. Recession may be lurking around every where. No one has been able to escape the consequences of COVID.

  4. There is another issue that seemed to be under control. If you have been paying attention to the latest daily new cases of Covid it shows a sudden up tick lately here in USA. Both the 7-day and 14-day averages have gone up slightly. It is not something to panic about yet but please check back the latest numbers from CDC and John Hopkins University. I hope all of you are up-to-date with your vaccine requirement. Soon we will be heading into the fall and winter season and if CDC recommends another shot of one of the vaccines approved by FDA, do not hesitate to take it. Stay safe.

  5. What are these Ethiopian economists doing to save Ethiopia from the wrath of Economic Shock Therapy that is being applied to plunder and loot its resources? Abiy Ahmed’s role is to drown the tolling of the bell with fireworks, shrieks of those made homeless etc as his handlers hasten the plunder behind the scene.
    Our economists should be asked the above question before it is too late for us all.

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