BY HIZKEL HAILU
Despite challenges, the government of Ethiopia is working on stabilizing the increasing rate of inflationary economy of the country. In fact Ethiopia’s economy is increasing from year to year. But several factors including hoarding of goods and illegal trade by some egotistical traders are affecting the national economic growth.
According to academic Journal written by Abdulkrim Youse and Sisay Debebe in January 2021, the inflation rate in Ethiopia is increasing. As to the document, the overall average inflation rate of countries like Ethiopia, Sudan, and Kenya remains double digits despite fastest-growing economies’ performance over the last two decades.
It subsequently incorporates a detrimental impact to support economic growth in an extended period. The economic growth results from fiscal, monetary, and various other economic policies recommended by policymakers. Unless the government and traders work harmoniously, it could not be possible to achieve the desired economic growth, the paper suggested.
Months ago, the Ethiopian government unveiled a set of new bank notes as a part of its efforts to curb cash hoarding, illegal trade activities, and illicit financial flows in an already struggling economy.
Moreover, Ethiopia has undertaken unprecedented economic and political reforms over the past years. The new Ethiopian government, led by Prime Minister Abiy Ahmed (PhD), who was sworn in on April 2, 2018, announced at the outset its plan to democratize the country, reform the economy, and increase private sector participation.
Appreciating the measures taken by the government in reducing the inflation rate, Economist Shiferaw Adissu (PhD), Edmonton, Canada said that the government should also improve employee’s salary. Besides, it is also better to provide different incentives for both public and private sectors so as to reduce the impact of inflation across the nation, he noted.
He further elucidated that modernizing agriculture and solving problems related with foreign currency are among the best solutions to curb the problem though the problem of foreign currency cannot be solved overnight.
In line with the country’s free market system, the government should also strive to execute its economic policies and strategies effectively. Unless, it could be difficult to control and stop greedy traders and individuals, he asserted.
Speaking to the local media, Shiferaw also stressed that the government shall give due emphasis for increasing productivity and encouraging domestic and foreign investors to invest in Ethiopia in order to overcome the current economic inflation across the nation.
Mentioning high population growth, instability at some parts of the country coupled with some natural and manmade disasters as the root cause for the increasing rate of the inflation over the past years, the economist stated that modernizing agriculture would be also a better mechanism to condense this problem.
As to him, there would be less productivity and restrictedness of a given product at some areas only due to the downing of communication lines like; road, electricity and others. Adding he said, “There is a fact that some TPLF junta affiliated, anti-peace groups that have looted enormous public wealth during their 27-years-long leadership, have been engaged in withholding of goods and other market manipulation which have caused artificial inflation in the country.”
For Shiferaw, lack of supply is also seen as a root cause for illegal traders for hoarding goods. Therefore, if the government can work tightly in order to increase the supply of goods and service across the nation, it will be possible to reduce the inflation rate of the country.
As inflation discourages investment, fundamental solution is needed in order to reach out the inflation. Undoubtedly, the government is working aggressively in order to attract foreign direct investment (FDI) which is paramount importance for booming the nation’s economy.
Given the scale of investment required to achieve the goal of becoming a middle income economy by 2025 and the announcement of new economic reforms, the country needs significant inflows of FDI. Tax incentives for investment in the high-priority sectors, such as manufacturing, agribusiness, textiles, sugar, chemicals, pharmaceuticals, minerals, and metal processing, underscore the government’s focus on FDI.
As to him the government should also stick on its stance about new currency printing and it should also immediately functional any foreign currency that will be earned from loan or support unlike what was happened for the past 27 years. Unless it becomes functional, it will directly or indirectly harm the economy, he added.
Encouraging the government’s commitment to substitute imported wheat with the domestic production and adopting cloud seeding technologies for increasing productivity, he suggested that the government should also work on monitoring illegal hording of goods which is being increasingly seen among greedy traders.
He further stated that the government should also manage problems related to foreign currency by itself despite the fact that it will take time to solve the problem adding that inviting investors to the Ethiopian market is suitable for stimulating the national economy.
Adding to the point, he recommended that it is highly necessary and demanded to create peaceful political and economic situation as well as to assure sustainable peace and stability across the nation in order to restrain hoarding coupled with reduce economic inflation in Ethiopia.
Meanwhile, the Ministry of Trade and Industry (MoTI) for its part is working exhaustively in order to stabilize the economy. Along with increasing production and productivity, bridging the gap between demand and supply, extensive work is underway to protect the rights of the consumers and establish the business system by enforcing the law on the business community, Eshete Asfaw, State Minister of MoTI said.
The government has established a task force that will successfully conduct market stabilization from the federal to the lower business structure, Woreda level. Accordingly, the Ministry is regulating and taking legal measures against illegal traders that can be among the raising factors for lack of supply of goods, rising inflation of commodity prices without any tangible economic reason.
As to the State Minister, efforts are also underway to protect the public from the pressures of illegal traders and contrabandists who are disrupting the trade system through hording excess products in a warehouse.
He further stated that the raising price of imported wheat price to 2,200 Birr which used to be imported by 800-900 Birr per quintal as a result of the global economic crisis caused by the Covid-19 pandemic, has a significant impact on the increasing of the inflation.
While providing a solution, he called on the public to be vigilant in cracking down on illegal brokers and traders who are working to increase the cost of living by storing and hiding goods coupled with increasing prices.
The State Minister added that the government is being closely monitoring to prevent undue inflation due to the holiday season and to improve supply and demand gaps. Work is underway to import baby food and other basic food items through Diaspora account and Franco Valuta basis.
During the first nine months of the current fiscal year, different actions have been taken against the illegal traders. Accordingly, 72,148 warnings were issued, 46,513 businesses were sealed, 101 were suspended, business licenses of 320 traders were revoked and 1,223 traders were also charged. Totally, through taking actions on 120,305 businesses, ETB 12,806,435 amount was transferred to the government.
On the whole, economists agreed that the government, the traders, the entire community and all the stake holders should work as hand in glove in order to bring a big change in tackling hoarding, illegal trade so as to stabilize the inflationary economy of the country.
The Ethiopian Herald April 17/2021
