May 10, 2011

Ethiopian Inflation Accelerates to 29.5% as Food Costs Jump

By William Davison
May 10 (Bloomberg) — Inflation in Ethiopia accelerated to 29.5 percent in April as food prices jumped, the Central Statistical Agency said. The inflation rate increased from 25 percent in March, the Addis Ababa-based agency said on its website today. Food prices, which make up more than half of the basket of goods used to calculate overall inflation, surged 32.2 percent from a year earlier, while non-food items rose 25.6 percent, it said.

Annual inflation has quickened from 5.3 percent in August following an 18 percent devaluation of the birr against the dollar on Sept. 1. In January, the government introduced price controls on goods including bread, meat, sugar and beer, citing a lack of competition in the domestic market.

Global food prices have risen this year as U.S. corn stockpiles fell to the lowest since 2007, soybean inventories shrank to the smallest since 2003 amid flooding in Canada, China and Australia and droughts in Russia and Europe. The world food- price index tracked by the United Nations’ Rome-based Food and Agriculture Organization rose to 232.1 points in April from 231 points in March, having fallen from a record 237.2 in February.

“Clearly the international commodity and fuel price shock has had some impact, but loose monetary policy and the large depreciation have played a role too,” Sukhwinder Singh, the International Monetary Fund’s resident representative in Ethiopia said in an e-mailed response to questions today.

“Government needs to tighten its monetary policy and ensure any fiscal response to the global shocks is affordable and well targeted,” Singh said.

Ethiopia’s central bank uses measures including minimum deposit rates and Treasury-bill auctions to conduct its monetary policy. Any inflation rate above the government’s single-digit target is a “concern,” central bank spokesman Alemayehu Kebede said.

edited by Paul Richardson, Ana Monteiro.

To contact the reporter on this story: William Davison in Addis Ababa at wdavison3@bloomberg.net
To contact the editor responsible for this story: Paul Richardson at pmrichardson@bloomberg.net

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