Economic struggles in Ethiopia cast shadow over Muslims, Christians holy month

March usually marks the holy month of fasting for two major religious groups in Ethiopia: Ramadan for Muslims and Hudade for Ethiopian Orthodox Christians.

However, this year, the faithful's spirit has been dampened by the country's struggle to rein in runaway inflation, a persistent issue over at least the past three years.

According to the latest World Bank estimates, the inflation rate in Ethiopia has surged to nearly 34 per cent, a figure that many citizens contend is inaccurate and almost half of the real rate, pointing to what they are paying for basic goods and services.

"Prices for every single thing have skyrocketed, and they are changing daily," Aisha Mohammed, a resident of the capital Addis Ababa, said.

Yordanos Alemu, another shopper, said she had been shocked and surprised by the price of goods.

"The problem is that these are not things that we can omit from our lists. These are the essentials that we have to get," she told Anadolu Agency.

What could be driving inflation in Ethiopia?

Across the vastly populous country, there is particular resentment over the role of brokers and intermediaries in the Ethiopian market, which people feel has a significant role in the commodity price spikes.

However, Ethiopia's foremost economists, like Tewodros Makonnen Gebrewolde, say that inflation in Ethiopia is "demand-driven," and not heavily influenced by brokers.

"Credible studies indicate that it's demand-pull inflation, which has a massive money supply, that has created this massive inflation in Ethiopia," says Tewodros.

Tewodros is a senior economist at the International Growth Center based at the London School of Economics.

"Though it needs better scrutiny, the supply side also has some influences; the manufacturing structure, the channels of supply, and so on can be seen as major areas to be examined when talking about the surge, particularly in the food sector."

With population and market size expanding, manufacturing inefficiencies have widened gaps in meeting the needs of consumers, he said.

He added that political turbulence has worsened the situation, which has complicated the transportation of goods from some regions, particularly the conflict-ridden north.

On top of that is the global economic scenario and surge in commodity prices, according to Tewodros.

"Since Covid-19, the unfolding political and economic crisis has played its part. The Red Sea escalation, the Russia-Ukraine war, and the Israel-Palestine issue, all contributed to the increase in global commodity prices, thus adding to Ethiopian inflation," he said.

Government efforts

A key part of the Ethiopian government's strategies to address economic problems has been efforts to secure maritime access for the landlocked country of over 120 million people.

A deal for this came on the first day of 2024, when Prime Minister Abiy Ahmed hosted Muse Bihi Abdi, president of the breakaway Somaliland, in Addis Ababa.

The two leaders signed a memorandum of understanding for Ethiopia to lease a 20-kilometer (12-mile) stretch of coastal land in Somaliland, giving the landlocked nation crucial access to the Red Sea through the port of Berbera.

The agreement has not come without its share of controversy, escalating tensions between Ethiopia and Somalia, and placing the wider region on edge.

Mukerrem Miftah, assistant professor of policy studies at the Ethiopian Civil Service University, believes maritime access could prove pivotal in resolving Ethiopia's economic problems and even make the country a frontline actor in the Red Sea. He also agrees that the deal with Somaliland comes with political and security baggage.

"The reactions can tell us that this MoU has triggered many concerns and diplomatic queries. But, in my opinion, these were not outright rejections but precautionary statements," he said.