Inflation, Fatal as Bullets, Should Be Treated Second to None

It has been one year since the Tigray People’s Liberation Front (TPLF), labeled as a terrorist group by Parliament, attacked the National Defense Force stationed in Tigray Region. Ever since the attack and the ensuing military engagement and all its baggage, the state of the economy seems to have arguably missed the attention it deserves.The election held last June, the second phase filling of the Grand Ethiopian Renaissance Dam (GERD), and the inaugural event of the new government premiered by Abiy Ahmed (PhD) in the capital’s Meskel Square, were major undertakings that captured the attention of both the general public and the ruling party. However, scenes showing the ruling party’s chief inaugurating or visiting project sites have faded away as security is now top on the government’s agenda.

As much as the security concern appears to be understandable, it comes on the backdrop of skyrocketing inflation, which shot up exceptionally higher than the single-digit target set by the government—reaching 42Pct in October. Demonetization of the local currency, targeting the reduction of money circulating outside of the banking system and giving more leverage to the central bank’s efforts to control money supply, failed to bring inflation to single digits. Inflation has been growing alongside the spread between official and parallel exchange market rates.

Food prices continue to accelerate, reflecting the compounded effects of drought, flood, locust infestation, and war in Tigray and other parts of the country. The unrelenting ascent of inflation is occurring regardless of domestic and federal authorities’ attempts to manage the pressures. The government’s objective has been to ease inflation, cost of living, as well as to reduce unemployment. On a monthly basis, consumer prices went up 4Pct, following a 3.6Pct rise in the previous month.

Controlling the unbearably growing cost of living and maintaining promises made for a more robust private sector must be integral parts of the conflict management process. As the stage for the military engagement has shifted from Tigray to Amhara and Afar regions, more work needs to be done in other relatively more stable states. Government must push for surplus production in Oromia, Sidama, Gambela, South, South Western, and Somali regions.

The administration must also plan to utilize the private sector not just to fund the military engagement, but also to curb inflation and sustain the economy during and beyond the time of war. A revitalized effort must be sought in relatively more peaceful states to bring in more private sector investment into the economy.

Taking inflation, or the struggling economy, for granted is as fatal as the bullets on the battleground. As much as it feels understandable that conflict management is the top priority of the time, curbing inflation and bringing in more private sector investment must be of equal priority. EBR


10th Year • Dec 2021 • No. 102

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