Ethiopia sees inflation down to single figures by July

Ethiopian Prime Minister Meles Zenawi listens during the
opening session of the 12th African Union Summit in
Ethiopia's capital Addis Ababa, February 2, 2009.
REUTERS/Antony Njuguna (ETHIOPIA)

14 February, 2009

ADDIS ABABA, Feb 14 (Reuters) - Ethiopia's high rate of inflation will be back to single figures by June or July this year, Prime Minister Meles Zenawi said.

The Horn of Africa nation's annual inflation rate hit a high of 61.7 percent in August 2008, spurred by soaring food and fuel prices.

It has since fallen steadily, reaching 37.8 percent in January.

Speaking at a news conference late on Friday, Meles said a halt on government borrowing and a rise in bank reserves had underpinned the declining rate.

"The global inflation cycle we had last year is dead. Prices are going down," said Meles, adding that taming inflation was the number one economic priority for his government.

"We expect inflation in the single digit rate by June or July."

Meles said Ethiopia planned to rebuild foreign exchange reserves to 1.8 months of imports by the end of the financial year. The IMF says reserves are currently equivalent to one month of imports.

Despite the difficult global panorama, Meles reiterated the official forecast that Ethiopia's mainly agricultural economy will grow by 11.2 percent in 2009, up from 10 percent last year.

The International Monetary Fund has predicted 6.5 percent growth for Ethiopia in 2009.

The Ethiopian leader is calling for wealthy countries to finance a "vulnerability fund" for the world's poorest.

"The coming decade or so is likely to be very dark indeed for Africa," said Meles, adding that developed nations had allocated some $7 trillion to battling the financial crisis.

"A bank in these countries that is deemed too important to fail is getting more assistance than the whole continent of Africa." - By Barry Malone