April 25, 2019
The last seven years were the most revealing to question Ethiopia’s economic progress despite the government of Ethiopia bragging of achieving more than 10% growth. There was no time some of us escape thinking about the economic direction of the country, as regular citizens, simply by looking the day to day inflation while people’s income remains stagnant, production remained virtually at standstill relative to population. Adjusted for the cost of living, Ethiopian public sector workers now earn far less than 30 years ago. It was not hard to make a living for ordinary Ethiopians 30 years ago, even with the lowest salary in the county’s payroll system. This economic opportunity, for the average man/woman, started to slide since the TPLF led EPRDF took control of Ethiopia. The situation became worst since 2005; right after the ruling party lost the election to the CUD but reversed its defeat to victory by force.
People in the streets have been complaining every day while the TPLF led EPRDF constantly throws a barrage of propaganda, supported by the World Bank, IMF and many western governments about the progress Ethiopia made. Despite all these praises the average man never accepted it. TPLF led EPRDF has a showcase for development by presenting buildings that were constructed through embezzlement, corruption and money laundering. It presented roads/.highways constructed with loan money.
Average Ethiopians were able to build their houses during the Derg time by organizing themselves into associations, with soft loans from banks without compromising their standard of living. Today it is unthinkable, even for well-paid employees, to do that. For that reason, many people went into squatting to building their huts in an attempt to survive. Today Ethiopians are in fact in the survival of the fittest mode in the words of Darwin. As theft of government resources became rampant, it immensely contributed in driving the poor more poor by increasing inflation. Year after year the foreign trade income is stagnant or sliding down. With this vivid bad record, Ethiopian economists inside and outside of the country, unfortunately, fell to a trap by the so-called double-digit growth report coming out of international financial institutions. Average people were always surprised why Ethiopian economists could not closely and adequately see what the common Ethiopians in the streets could say or feel. Today, most Ethiopians are affected by unknown diseases like diabetes and stroke. I have a feeling economic stress has caused this.
Inflation in Ethiopia is alarming. In every sector to execute a small project, an immense amount of money is required. For instance, today, to build one kilometre of paved road we are required to spend 100 million birr. Thirty years ago it was 1 million per kilometre. Instead of running projects through bilateral cooperation and hiring experts, the government awards contracts to foreign companies and local companies adopt that price becoming one reason for the unabated rising cost of doing a project in Ethiopia. Instead of increasing in-house capacity, the government awards projects at inflated prices pushing the cost of doing business very high. Ethiopia used to have a very capable highway authority that built many bridges and paved roads. Unfortunately, Ethiopia was controlled by an enemy state and lost all values of institutions it built in the past.
The concern now is what will be the future of our tourism if Ethiopia cannot contain inflation. Nowadays the groceries prices are almost the same price as in North America, some even exceeding North American prices. The only blessing that kept the country going is the relatively lower labour cost. Average tourists now might have managed it to go to Ethiopia because accommodations are relatively cheaper; largely investors in the sector give little return value for their buildings. This is due to either the rooms were built at the time prices were cheaper or people have little concept on how to calculate the rate of return. There will come a time where people realize that they cannot make money with the banks’ interest rate so high, and material cost astonishingly rising. If the government does not take measure to contain rising food costs and goods or services; there will be a higher labour cost rise which will severely affect many things.
The average tourists are not rich and these are the ones who like roaming because they have a philosophy in life driven by age and new ways of thinking. It is known that Ethiopia monetary system is fixed which means more dollars are required if a tourist comes to Ethiopia in the current rate of rising inflation. One of the silly arguments given in Ethiopia for inflation and poverty is population. India and China are the most populous nations on earth but they feed their population better than Ethiopia does, and food prices are quite cheaper. Tourism has a much more contribution to the economy of these countries since they are affordable for travellers. Our land policy and lack of effectively utilising labour have made things in Ethiopia a problem as far as the production of food items is concerned. A large labour force is out of work and has made the country to depend on small farmers. Ethiopia should be able to engage its citizens into production. As high as 60% of the youth in Ethiopia are not engaged in any work. It is not population increase that is a problem. In fact, population attracts the market to Ethiopia. Ethiopia must, however, have a plan to engage this young energetic demography into work. On top of that Ethiopia’s political system has hindered free labour movement and hence the country is unable to solve food shortage. In North America, only 3% of the population could produce enough to feed their respective population, largely thanks to technology. If technology is a problem to achieve this in Ethiopia, it is possible to solve the shortage of food by engaging the youth, in large number, in the agricultural sector. For this, the education system should be reformed to include practical training in the field of agriculture or organize 3-4 months of internships per year. The educated youth in the countryside know faming well and they should be given land to produce. Note that very educated Orthodox clergy in Egypt do farming for a living, produce food more than their needs, and export it to North Africa and Europe. This lesson has to be adapted to Ethiopia. Going to university does not mean not to be engaged in agriculture anymore.
The following is data I obtained from the internet about food prices in overpopulated India to indicate how Ethiopia is becoming increasingly costly to tourism. A lot of Asian countries benefit from tourism because the cost of living is much cheaper than it is in Ethiopia. Diaspora Ethiopians cannot visit their country or plan to return for permanent residence if prices keep skyrocketing month after month. The pressure on the life of local people is too much list. Enjera and bread and shiro wot are the once relatively cheaper things the kept them in survival mode. An average local Ethiopian cannot afford the kind of price listed below from an Indian market in India. Ethiopia used to be cheaper than India before Woyane came to Ethiopia.
I am even surprised that Ethiopian economists are not calling for a symposium to analyse rising costs of food items vs. with other countries based on experiences in South America and Asia, relative to income, and advise the government how that can affect tourism and other sectors of the economy. With the current pace of inflation, the much good intentions and aspirations of PM Abiy to boost the Ethiopian economy from tourism may ultimately be unachievable.
| India | India | Ethiopia | |
| Food Items from grocery stores | Rs. | Birr | Birr |
| Milk (regular), (1 liter) | 45.85 | 19.03 | 30.16 |
| Loaf of Fresh White Bread (500g) | 29.32 | 12.17 | 21.75 |
| Rice (white), (1kg) | 49.95 | 20.73 | 50.75 |
| Eggs (regular) (12) | 62.48 | 25.93 | 53.07 |
| Local Cheese (1kg) | 337.20 | 139.92 | 199.52 |
| Chicken Breasts (Boneless, Skinless), (1kg) | 215.82 | 89.21 | 174 |
| Buffalo Round (1kg) (or Equivalent Back Leg Red Meat) | 318.82 | 132.29 | 298.41 |
| Apples (1kg) | 128.62 | 53.37 | 140.94 |
| Banana (1kg) | 48.23 | 20.01 | 29.87 |
| Oranges (1kg) | 65.41 | 27.14 | 36.25 |
| Tomato (1kg) | 29.19 | 12.11 | 22 |
| Potato (1kg) | 22.11 | 9.17 | 17.98 |
| Onion (1kg) | 25.96 | 10.77 | 19.43 |
| Lettuce (1 head) | 33.59 | 13.94 | 20.3 |
Price of selected food items: Comparison between India and Ethiopia
Copyright © 2009-2019 Numbeo
Last update: April 2019
Conclusions
The Ethiopian government must pay attention to rising inflation. The cost of doing business is getting increasingly higher; Wealth is reducing with rising inflation, and in the end, Ethiopia may be unattractive to investment and tourism, especially given it follows a fixed monetary policy.
Producing enough food should be the priority in the to-do list and this may be achievable in the short term by increasing the workforce in agriculture, and modernization of agriculture in the long term. Remember all Ethiopians were food producers before the country diversified into other sectors.
Government involvement is required in larger projects such as Highways, Water resources, electric city and health sector rather than awarding everything to contractors. This is normal practice in North America and Europe. This helps to control prices. Experts can be hired to work with the local workforce.