Ethiopia Plans More Price Caps Amid `Unhealthy’ Competition, Ministry Says – By William Davison

January 12th, 2011 Print Print Email Email

zenawi-so-whatEthiopia plans to impose price controls on more products as it tries to curb inflation that is being fuelled by a lack of competition in the Horn of Africa country, a Trade Ministry official said.

The government introduced caps on the cost of bread, meat, sugar and beer, and imported products including milk powder and rice on Jan. 6. The controls were aimed at addressing “unhealthy market competition,” the state-owned Ethiopian News Agency reported, citing Prime Minister Meles Zenawi.

“There will be more products added,” Efrem Woldeselassie, director of inspection and regulatory affairs at the ministry, said in an interview in Addis Ababa, the capital, on Jan. 10. He declined to provide further details.

St. George, an Addis Ababa-based brewery, said it can cope with the controls, though it is seeking further clarity on the measures, said Esayas Hadera, marketing manager at the company. Additional restrictions may limit the supply of goods to domestic stores, as it did in Zimbabwe three years ago when similar measures were introduced.

“The same fate awaits Meles’ policies and the birr, unless the regime changes its policies and begins to attack the root causes of the price hikes,” Seid Hassan, an Ethiopian professor of economics at Murray State University in Kentucky, said in an e-mailed statement yesterday.

Birr Devalued

Ethiopia’s central bank on Sept. 1 devalued the birr by 17 percent against the dollar. Annual inflation accelerated in the following two months, before slowing to 10.2 percent in November from 10.6 percent in October. Food prices rose 5.8 percent in November from a year earlier, according to the Central Statistical Agency.

World food prices climbed to a record high in December on steeper sugar, grain and oilseed costs, exceeding levels reached in 2008 that sparked deadly riots from Haiti to Egypt, the United Nations Food and Agricultural Organization reported on Jan. 5. An index of 55 food commodities tracked by the UN’s FAO gained for a sixth month to 214.7 points, above the prior all- time high of 213.5 in June 2008.

A lack of “fair and transparent” competition in Ethiopia is the “most serious problem” facing the authorities, which will be addressed by changing the country’s laws, Efrem said.

To contact the reporter on this story: William Davison in Addis Ababa via Johannesburg at 1999 or pmrichardson@bloomberg.net

To contact the editor responsible for this story: Antony Sguazzin in Johannesburg at asguazzin@bloomberg.net

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