Monday, 13 June 2011

The annual rate of inflation in Ethiopia rose to 34.7 percent in May from 25.6 percent in April as food prices climbed, the Central Statistical Agency (CSA) said today.

Food prices increased 41 percent in the year, compared with a 32.2 percent increase in April, it said.

According to IMF, one of the major causes of inflation in Ethiopia is "excessive" growth in the supply of money, which expanded 35 percent at the end of March. The IMF had previously predicted an increase of 22 percent in money supply in the current fiscal year.

The government, however, says that high international prices of commodity are responsible for the increase in inflation. Global food prices hiked in nine of the last 11 months, reaching a record in February, amid decreasing grain supplies and rising demand, according to the United Nations.

The price of oil has hiked due to unrest in the Middle East, but after the region stabilizes, prices in Ethiopia will drop, Hailemariam Desalegn, Deputy Prime Minister said on June.

The negative real interest rates that have resulted from rising inflation are discouraging a necessary boost to Ethiopia's national savings rate, the country director of the World Bank in Ethiopia, Ken Ohashi, said on June 7.

Ethiopia may find it difficult to sustainably finance its five year growth plan unless it increases its savings from the current official rate of 5 percent of gross domestic product, Ohashi said.

The IMF predicted on May 31 that Ethiopia’s growth rate might fallfrom 7.5 this year to 6 percent in the fiscal year to July 7, 2012, partly due to inflation. The government's forecast for the current fiscal year is 11.4 percent. However, Hailemariam said that the government would achieve its growth targets, Hailemariam said.

Source: Bloomberg