Ethiopia PM defends economic policy as humanitarian crisis looms

By ARGAW ASHINE, NATION Correspondent in Addis Ababa, Ethiopia

19 March, 2008

Despite a looming humanitarian crisis and high inflation, Ethiopian Prime Minister Meles Zenawi has defended his government’s economic performance

Inflation rate currently stands at 17 per cent and about 8 million people require food aid.

Presenting his mid-year report to parliament Tuesday, Mr Zenawi said the national economy has been growing at 10 per cent annually for the past five years, and that this will rise to 10.8 cent this year.

“Our export trade has grown by 32 per cent in the past eight months, which means that we will achieve our goal for the year successfully,” he said.

The PM, however, acknowledged that inflation was worsening. “Even though our main objective is being achieved, our endeavour to control inflation has not yielded the desired result,” he said.

He attributed the problem to the high price of petroleum and increasing demand for food grains, adding that the international crisis is very complex.

“The problem cannot be tackled by Ethiopia alone. It’s obvious we don’t have the economic capacity to control the global market,” the PM said.

He, however, announced various schemes to minimise the impact of the high fuel prices and worsening local inflation. These include the removal of value-added tax and turnover tax from grains and continued direct and indirect subsidies on basic goods for poor urban dwellers.

The government currently subsidizes the cost of fuel, food and cement to the tune of $500 million annually.

“Subsidies at such a high cost, even temporarily, are very difficult to bear for a poor country like ours,” the PM noted.

However, opposition MPs questioned the government’s performance, saying it was responsible for the country’s economic problems.

“You (Meles) are responsible for the current economic crisis and it’s due to your party’s failure and incompetence. I believe you should resign, like accountable leaders do,” Temesgen Zewdie, a former member of the Coalition for Unity and Democracy party now working on creating a new party said.

Meanwhile, Lidetu Ayalew of the Ethiopian Democratic Party expressed scepticism about the government’s achievement. “It’s not equitable and is not benefiting the poor; it’s not even sustainable,” he said.

Bulcha Demeksa of the Oromo Federalist Democratic Movement also blamed the government for the economic crisis, attributing it to Ethiopia’s intervention in neighbouring Somalia. “I don’t think it’s fair to spend millions of dollars in Somalia when millions of our people are starving and our inflation rate had reached an alarming level,” he said.

Opposition MPs also raised a number of questions regarding the prevailing drought in various parts of the country, but Mr Zenawi downplayed the situation. “It’s due to the failure of mid- year rains and the situation in some parts of the country needs close observation. We are closely working with regional governments and there is no serious threat as you (opposition MPs) say,” he said.

The PM said the drought would not seriously affect the government’s economic programmes.

Meanwhile, humanitarian agencies have been issuing warnings on the worsening drought, mainly in the eastern and south-eastern parts of the country. They estimate that more than eight million people require food aid.

Recently, local authorities confirmed that thousands of livestock had died in Borana in the Oromia region, which is among the hardest hit by drought.

And according to the UN office in Addis Ababa, more than 14,300 livestock deaths were reported. Human deaths related to hunger have also been recorded in hospitals in the region.

Mr Zenawi promised to do more to stabilise the economy and protect the poor. One measure involves setting up a task force comprising the police, national security and intelligence services and the Ministry of Trade and Industry, to permanently monitor illicit activities and institute legal measures promptly.

In recent weeks, the government has raided and closed down a number of black market foreign exchange shops and arrested hundreds of “illegal” traders accused of inflating food prices.