ADDIS ABABA, Ethiopia (AP) — Prices on the menu have been erased at a small hotel on the outskirts of Ethiopia’s capital.
That was no mistake, the waiters said, as businesses in Addis Ababa have struggled to keep up with rising inflation since the government imposed a flexible exchange rate policy at the end of last month.
Since then, the Ethiopian birr has fallen by 60% against the dollar (Monday to Friday), causing unrest as consumers are forced to pay more for basic goods and some entrepreneurs are stockpiling.
The menus at the Samra Hotel in Bole, a leafy suburb of Addis Ababa, captured the instability well: every meal has a new price at every moment.
“Previously, prices were updated bi-monthly, but now they are updated daily, and sometimes even hourly, to reflect the changing market landscape,” said Rahel Teshome, who works at the hotel.
Many supermarkets in Addis Ababa are stockpiling products in warehouses and selling only small quantities in their stores to avoid punishment from city authorities, who have vowed to crack down on hoarders. Consumers who want to buy in bulk are being forced to pay inflated prices for products they have to retrieve from warehouses.
At Merkato, the capital’s largest open-air market, guards have been stationed to prevent businesses from raising prices. Last week, police raided several warehouses and seized 800,000 liters (210,000 gallons) of edible oil, which they later distributed to local cooperatives, which offered the oil at previous prices. More than 3,000 stores accused of hoarding have been closed across the country.
The Addis Ababa city trade office has warned that more measures will be taken against people who take advantage of the floating birr rate to push up prices.
The new exchange rate policy was a historic decision in a country where the government had fixed the price of foreign currency for decades, allowing a black market to flourish. Commercial banks can now fix the price of foreign currency, and non-bank entities are allowed to operate currency exchanges for the first time.
The International Monetary Fund has approved a four-year, $3.4 billion credit facility to coincide with Ethiopia’s reforms. The IMF pledged to immediately disburse $1 billion to address urgent needs, with Managing Director Kristalina Georgieva describing the reforms as a “milestone for Ethiopia.”
Ethiopia, which had been struggling with foreign currency shortages in the months leading up to the reforms, imports many essential goods. To help consumers cope with the impact of the new policy, authorities imported 14 million liters (3.7 million gallons) of edible oil, but such interventions were minimal given the rising prices of other essential goods.
Experts say the coming days will be unpredictable for Ethiopians in a country where civil servant salaries have stagnated for years.
People on fixed incomes will be hit hardest by the floating birr, said Getachew T. Alemu, a public policy specialist based in Addis Ababa, adding that the immediate injection of IMF funds will not be enough to cushion the pressure.
“The situation could get worse, especially for people on fixed incomes, unless prudent policy measures are taken,” he said.
The government seems unable to follow its own advice as it cracks down on price speculators. Last week, authorities raised the price of ordinary passports from 2,000 to 5,000 birr, shocking people like Almaz Teferi, who had just started trying to get a passport.
She and some of her friends hope to find work as domestic workers in one of the Gulf States.
“I worked as a cleaner to increase the cost of the passport. I came by on Monday to check the cost and on Thursday the price had already increased quite a bit,” Teferi said.