Ethiopia food prices spike after govt lifts price caps, making food unaffordable for many

June 23rd, 2011 Print Print Email Email

ADDIS ABABA, Ethiopia — When Ethiopia’s government imposed price controls in January to combat the spiraling cost of staples like meat, cooking oil and bread, butcher Wabe Habse had a long line of customers, but could barely make a profit.

Now, after price controls were dropped earlier this month, Wabe is still not making money.

“The meat market has collapsed,” said Wabe, who raised his prices nearly two-fold and saw his customers abandon him. “I am not sure how we are going to survive.”

Ethiopia, like many African nations, has seen spiraling food prices this year. Nearby Uganda has seen violent protests over rising costs.

Buyers and sellers in Ethiopia’s capital say the government’s attempt to bring down prices by imposing price caps on basics like oil and sugar for five months this year has caused even more turmoil. When they were in place, the price caps bankrupted businesses that could not afford to sell at cheaper prices.

The government claims the country is a victim of rising international food prices, but the International Monetary Fund says the government is causing inflation by borrowing and printing money to pay for infrastructure projects. One economist called the government’s attempt at price caps “a fool’s errand.”

After most of the caps were lifted in early June, prices again soared to levels unaffordable for many here. Already, 3.2 million Ethiopians depend on food aid. Recent government figures put inflation at nearly 35 percent in the last year.

In a rare show of rebellion in a country historically used to authoritarianism, Ethiopian consumers earlier this month started a text-message campaign to boycott meat in an attempt to force prices down. Wabe says the campaign has affected his customer base but that he can’t afford to reduce prices.

“There is no profit if I do that,” he said.

Taxi driver Abraham Habtamu, who earns about $60 a month in Addis Ababa, said that since the price controls were dropped he can only afford to gaze longingly at the beef that is now selling for about $5 a kilogram ($2.30 a pound), up from the capped price of about $3 a kilogram ($1.40 a pound).

“For me it is untouchable,” said Abraham, who is his family’s main provider.

Prices of cheaper goods such as chickpea flour have also risen. The flour, which formerly cost about 65 cents a kilo (30 cents a pound), is used to make a stew that is generally considered a poor man’s meal. Now it costs $1.60 a kilo (70 cents a pound).

Economist Seid Hassan, who was born in Ethiopia but is now a professor in Kentucky, said imposing price caps to fight inflation has been “a fool’s errand.”

“The measure was taken without any careful study about the causes of rampant inflation, and the ruling party took the measures to distract public anger and potential unrest,” said the economics professor, who teaches at Murray State University.

If it wants to create a healthy economy, Ethiopia should “minimize its heavy interventions in the ‘free’ market,” he said.

This East African nation’s communist government was overthrown in 1991 by the current administration, which despite promises of adopting free market principles established an economy in which state enterprises dominate key industries. Other sectors are strictly regulated.

Comments are closed.