Analysis: Citizens on fixed incomes are the most affected by constant inflation

By Getahun Tsegaye @GetahunTsegay12

Addis Ababa, 3 January 2022– Inflation has a huge effect on the livelihoods of many people in the country, but has profound effects on civil servants whose salaries remain unchanged. “Inflation hits hardest workers with fixed incomes, such as civil servants, retirees and low-income contract workers,” said Abis Getachew, an independent economist.

Rabiya Yesuf, an employee of the Ministry of Agriculture, explained that the price of agricultural products such as teff, onions, potatoes, tomatoes increased in November 2021 compared to the last two months. She said, “One kilo of Teff was 56 Ethiopian ETB in October and then increased to 59 ETB in November.” According to her, one kilo of onion increased by 15 ETB in one month. She expressed her concerns about the price hikes and how it affects her livelihood.

The Central Statistical Agency (CSA) in its latest reports revealed that the headline inflation rate (country-level 12-month moving average inflation) in Ethiopia increased by 25.5% in November 2021 compared to that observed over the same period a year ago. According to the report, food inflation was the highest, registering a rise of 30.1%, while non-food inflation stood at 19.4% in November 2021 compared to November 2020. The CSA indicated that the 12-month moving average inflation rate suggests a higher longer-term inflationary projection in the country.

The CSA reported that the year-on-year inflation rate in November 2021 jumped 33% compared to that observed in November 2020 while food inflation increased by 38.9%. The agency also reported that the month-on-month inflation rate recorded a decline of 0.6% and food inflation a decline of 1.7% compared to October 2021. ASC also reported that in November cereals, vegetables and pulses recorded a relative decline. falling prices while meat, dairy products. While prices for spices (mainly salt and pepper) and edible oils fell more slowly, coffee beans and soft drinks maintained an inflationary response in November.

“We don’t know if we can continue to pay such a high amount of school fees and we don’t have any plans to have another baby either.”

Meron Anteneh, civil servant in Addis Ababa

Sisay is a salesman at a private company who has complained about the price hikes, calling them “shocking”. She said while expressing amusement at the market movements in relation to her salary: “A kilo of orange has seen a 100% increase. I don’t think I will be able to afford it anymore.

But others say the biggest challenge they face is securing rent payments. Like Ayele who is a civil servant residing in Addis Ababa. He said: “Following the government’s declaration prohibiting rent increases, my landlord cannot increase the rent, at least for now. I however remain concerned that when the statement is complete they will increase it,” he added, “My salary has almost stagnated and has not shown steady growth as the rent for the house has increased alarmingly. “.

Another official who Addis Standard spoke to Tinsae who currently lives in a rented one-bedroom condominium on the Abado site. She said, “I paid ETB 6,500 per month but my friends who have been displaced from Wollo due to the ongoing conflict have been asked to pay ETB 7,500 for a similar room,” she added . “However, because some displaced people are returning to their hometowns, the rent is falling to where it was a few months ago.

Meron Anteneh, another civil servant, complained about the increase in private tuition fees in Addis Ababa. She said Addis Standard that her only son, who is currently in first grade, has been enrolled in the same school for three years. “The previous year, I was paying ETB 4,000 per quarter, but I am paying ETB 6,100. This is an increase of ETB 2,100, making it an increase of ETB 8,400 per year. She added, “Considering income that my husband and I earn, we don’t know if we can continue to pay such amount of school fees and we have no plans to have another baby”.

Asked about expectations regarding the measures taken by the government to regulate and combat inflation, some expressed hope that the salary increase would solve the problem. However, others complained about the supply chain, corporate greed and owner irresponsibility and demanded action to address the lack of social accountability.

“Since Merkato wholesalers have raised prices, I have no choice but to raise retail prices as well.

Abdi Naje, retail store owner

Abdi Naje, a retail store owner, said Addis Standard that since the government announced punitive measures against those involved in creating artificial price increases and shortages of raw materials, the market is stable. According to Abdi, this trend is not sustainable. He said, “Except for some items, like edible oil, milk and flour, the price of other edible and inedible items has started to come back to where it was,” he said. added, “because Merkato wholesalers [The biggest marketplace in Africa] increased the price, I have no choice but to increase the retail prices too.

Another worrying aspect is the increase in the prices of petroleum products. Ashenafi, a resident of Addis Ababa, said: “I am afraid that the cost of public transport and other goods will increase.

It should be mentioned that in December the federal authorities raised the prices of various petroleum products. According to the December adjustment, the price went from 25.86 to 31.74 ETB. As a result, the Addis Ababa City Administration Transport Bureau has revised the fares for public transport services.

Measures taken by the government

In an attempt to help low-income residents of Addis Ababa, the city administration cabinet has decided to provide loans up to ETB 500 million to provide subsidies to consumer cooperatives which will provide basic consumer goods and stabilize the market price of grain.

The Commercial Bank of Ethiopia (CBE), for its part, has announced plans to provide over ETB 100 billion in loans to the private sector, agricultural inputs and public enterprises in the current fiscal year. Of this amount, ETB 25 billion is earmarked for the private sector, ETB 30 billion for agricultural inputs, and the rest for public enterprises to stimulate the economy; and resulting in job creation.

Earlier in August last year, Ethiopia’s Ministry of Trade and Industry (MTI) unveiled the government’s plan to tackle the rising cost of living, cutting double-digit inflation to single digits by subsidizing commodities. The statement read: “A task force, from the federal level to the woreda level, is taking action against illegal business activities that cause more problems for society by raising prices without any valid economic reason for industrial and agricultural consumption. .

The ministry accused unnamed individuals of creating artificial commodity shortages and driving up prices. He warned that action will be taken against those involved in illegal activities disrupting the supply chain.

What the economists say ?

Abis Getachew is an independent economist and researcher who has conducted extensive studies on inflation in Ethiopia. When Addis Standard Asked how inflation has affected civil servants, who live on a fixed income, Abis said these sections of society are very vulnerable to the inevitable rate of inflation in Ethiopia. “The surge in inflation is alarming while their incomes are fixed, which makes life difficult for them,” he explained.

Explaining recent government interventions to set fixed prices for retailers and wholesalers, Abis pointed out that such measures might only have very subtle effects on market regulation for a period of time. The government should strive to work on major economic projects that would help minimize or alleviate such an alarming rate of inflation in the country, Abis said.

Abis responded to demands for a salary increase from civil servants saying, “The salary increase does not solve the standard of living of civil servants or employees living on a fixed income. In the Ethiopian context, this will cause price hikes on items that will create further destabilization.

“If the National Bank of the country is directly responsible to the House of People’s Representatives instead of the Council of Ministers, it will be more independent and have the freedom to design well-established policies that can help solve existing economic problems. .”

Abis Getachew, Independent Economist

“It’s not too late to correct inflationary spikes,” the economist said, adding that “the government and relevant agencies should work on housing, transport and business projects.” According to him, if these entities work on the availability of such projects at lower prices, consumers, including those on fixed incomes, would have the opportunity to shop according to their income.

He further advised the government to come up with a policy for the National Bank to become independent. “If the National Bank of the country is directly responsible to the House of People’s Representatives instead of the Council of Ministers, it will be more independent and have the freedom to design well-established policies that can help solve existing economic problems. .”

Regarding the ongoing war in the Tigray, Afar and Amhara regions, Abis said he believed the war might have led to supply shortages. “Due to the war, millions of people have been displaced from their homes and various industries have been destroyed and burnt down, disrupting the normal living conditions of many.” He added, “Food and other supplies were transported from other parts of Ethiopia to the war fronts and this could have led to shortages and contributed to inflation,” Abis said. He expressed his hope that the inflation rate would come down after the end of the conflict in the north and called on the government and relevant agencies to come up with interventions to regulate inflation spikes in the country. LIKE

Comments are closed.