Only few countries have endured continuous and crippling high inflation rates like Ethiopia has in the past 15 years. The average annual inflation rate in this period was 16.4Pct and peaked above 20Pct in 2008, 2011, and 2020. Recall that when inflation spiked in 2008, food prices in Ethiopia rose by a staggering 92Pct within a single year.
Over the last 12 months alone, general and food inflation rates rose by 20.4Pct and 23.1Pct, respectively, according to the Central Statistics Agency.
Although the continuous price growth and its cumulative effects have eroded the purchasing power of a large section of society, no segment of the community suffered more than destitute people earning miniscule income and living on a very tight budget. As the price of rent and utilities grew ever swiftly over the last 15 years, households with low and fixed income are experiencing extreme hardship.
To make things worse, the global coronavirus pandemic is making the lives of vulnerable urban and rural Ethiopians difficult and is pushing them towards extreme poverty. While well-off and middle-class households have the choice of diverting entertainment and elastic expenses to accommodate the rising costs of living, those living with only inelastic outlays are left with nothing to fall back on.
Latest estimates indicate that the susceptible segment of the population is considerable in size—households living below the national poverty line and those unable to fulfill their basic needs for survival. The percentage of urban dwellers earning below the poverty line ranges between 14Pct and 49Pct depending on their locales. For rural areas, the prevalence of destitution is between 10.6Pct to 20.2Pct.
Although this calls for policymakers to design policies that reduce the pressure brought on by inflation, the issue has rarely been addressed by policy frameworks. In the past, government used to avail subsidized basic commodities for poor dwellers in urban areas through local consumer association shops. Currently, however, beneficiaries are not getting sufficient supply. In fact, a significant portion of subsidized commodities slated for exposed populations falls in the hands of middle- and high-income earners.
Additionally, the volume of these subsidized commodities channeled to consumer association shops has significantly declined over the last two years as government diverts the slated supplies for internally displaced people. The same goes to the poor included in the Urban SafetyNet Program. Though the mechanism has previously shown progress, its success has been declining in recent years.
This shows that existing institutional arrangements for the delivery of subsidized commodities needs to be revamped. Since government’s plan to put an end to macroeconomic distortions through the Homegrown Economic Reform program of the last two years is falling short, fresh and innovative interventions are needed to save highly vulnerable people from shocks that could push them over the edge at any time.
While governmental commitment to address the agenda in the long run through its new ten-year economic plan deserves appreciation, short term solutions and immediate actions are needed to tackle contemporary and multi-dimensional poverty. The longer destitute people and low-income households are forced to endure continuous and fast-rising price upsurges, the bigger the suffering will be. EBR
9th Year • Jan 16 – Feb 15 2021 • No. 94