Ethiopia Struggles with Inflation After Exchange Rate Policy Change

ADDIS ABABA, Ethiopia (AP) — A small hotel in a suburb of Ethiopia's capital has removed prices from its menu, reflecting the severe inflation gripping the country since the government adopted a flexible exchange rate policy. This policy, implemented late last month, has led to a staggering 60% devaluation of the Ethiopian birr against the dollar, causing widespread anxiety among consumers as the cost of basic goods continues to rise. Rahel Teshome, a hotel employee, noted that prices are now updated daily, if not hourly, to keep pace with the volatile market. In response to the economic crisis, many supermarkets in Addis Ababa are hoarding products, selling limited quantities to avoid penalties from city authorities. The Addis Ababa City Trade Bureau has initiated crackdowns on hoarding, with police recently seizing 800,000 liters of edible oil from warehouses, redistributing it at previous prices to alleviate some pressure on consumers. Authorities have warned that further actions will be taken against those exploiting the currency fluctuations to inflate prices. The recent exchange rate shift marks a significant change for Ethiopia, which has long maintained fixed foreign currency prices, fostering a black market. The International Monetary Fund has approved a $3.4 billion credit facility to support Ethiopia's economic reforms. However, despite government efforts to import essential goods, including 14 million liters of edible oil, rising prices of other necessities continue to burden citizens. The impact of inflation is palpable, with recent hikes in government fees, such as the cost of ordinary passports, which jumped from 2,000 to 5,000 birr. This sudden increase has shocked many, including Almaz Teferi, who is seeking work abroad. The rapid changes in pricing have left many Ethiopians struggling to adapt to the new economic reality.