From: Biniam Tekle (biniamt@dehai.org)
Date: Mon Aug 18 2008 - 09:11:26 EDT
High prices intensify Ethiopian hunger crisis
By Barney Jopson in Addis Ababa
Published: August 17 2008 22:44 | Last updated: August 17 2008 22:44
Ethiopia has emerged as one of the biggest victims of global inflation after
food prices in the country nearly doubled in the 12 months to July,
intensifying a hunger crisis that has already affected millions of people.
The crisis has been magnified by local factors – drought, hoarding, and a
splurge of public infrastructure investment that has left the finances of
the country's cash-strapped government under strain.
The food component of Ethiopia's consumer price index leapt 91.7 per cent
in July from the same month last year, according to data released last week
by the country's statistical agency.
High fuel and food prices are threatening to undo the benefits of economic
progress made in recent years in many African countries, pushing more
families deeper into poverty and leaving them unable to secure enough food.
In Ethiopia – ranked one of the 10 least developed countries in the world by
the United Nations – the combination of inflation and a crop-killing drought
had left just over 10m people out of a population of about 80m in need of
food aid, the World Food Programme said last month.
Aid workers and diplomats in Addis Ababa, the capital, said more recent
unpublished surveys indicated that several million more people had slipped
into the crisis category since then.
Inflation has sapped the WFP's own purchasing power, forcing it to reduce
the size of the rations it distributes. It has also stopped buying cereals
in Ethiopia itself to avoid driving up prices further. Last month it said it
would need an extra $420m (€286m, £225m) to meet its food bill across the
Horn of Africa for the rest of this year.
The most dramatic increase within Ethiopia's food price index was for staple
cereals such as wheat and maize, whose prices in July were 171.9 per cent
higher than a year ago. Food inflation in neighbouring Kenya, by contrast,
hit a year-on-year peak of 44 per cent in May and has since slowed.
Ken Ohashi, World Bank country director for Ethiopia, said: "Inflation is no
longer driven solely by a domestic supply-demand imbalance and the global
trend, but by expectations of farmers and traders who are holding on to
crops in anticipation of further price rises, which makes them a
self-fulfilling prophecy."
To cushion the impact of inflation, the government earlier this year removed
taxes on grains, flour and cooking oil. It has nearly exhausted its
emergency grain reserve and has begun importing an extra 150,000 tonnes of
wheat from Europe and North America, but economists say its foreign currency
reserves are now critically low.
Ethiopia has not experienced food riots of the kind seen in some other
African countries, partly because the government of the prime minister Meles
Zenawi has ruled with an iron fist since unrest in 2005.
The government last year began to provide subsidised wheat to low-income
families in the cities, where the political opposition is strongest, a
policy that dismays aid workers who say the crisis is much worse in rural
areas.
Inflation began to accelerate in Ethiopia last year before it took off in
other countries. Eyessus Zafu, president of the Addis Ababa Chamber of
Commerce, said this was due to the government's policy of investing billions
of dollars in road, dam and power plant construction projects, which add
liquidity to the economy and increase demand for various inputs, but do not
increase the supply.
"They help you grow sustainably in the long run, but none of them are
contributing immediately to the production of food and goods," he said.
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