The increase in fuel prices and electricity rates are developments that foreshadow hard times to come. The ailing Ethiopian economy, to say the least, has had a series of bashings, including budgetary aid being cut by donors and the recent costly floods that have not only destroyed infrastructure and taken lives but also drained resources. The recent fuel price hike, though, brought about by the crisis in the Middle East and fears of the hurricane season in the Caribbean, seem prudent in regards to offsetting more drains in the economy but show signs of whitewashing certain issues as well. The government should understand increasing the fuel prices without adjustments to salaries or putting roofs on prices of commodities can only spell doom to the average Ethiopia. One cannot raise the price of fuel without making sure that its citizens are not left to the wolves.
In a country where social security is left up to informal institutions such as edirs and equbs the government needs to address the expected inflation that would wreak havoc on the lives of ordinary citizens. An increase in fuel prices will warrant a price hike of commodities ranging from foodstuffs to clothing and other services, since the bulk of Ethiopia’s transportation lies on road transport - which uses fuel. No doubt speculators will pounce on the idea to create artificial scarcity, as has been the case in regards to sugar and cement, and thus raising prices to astronomical levels. Can we handle yet another price increase? Have we really recovered from this year’s crises that include drought, bird flu, strikes, floods, fuel price hikes, sugar and cement shortages?
One has to understand that cutting back public expenditures, though necessary, should not be backed up by half-baked ideas - exit strategies that benefit the masses should be thought through as well. In regards to fuel the current government (and the previous Dergue regime) has played with the idea of introducing ethanol as an alternative fuel. As always, speeches were made along with the necessary sound bites to please donors and anxious lenders, but the idea was dropped just as suddenly as it was brought up. We need to see such projects through, we cannot continue gliding, putting our future and stability in faith alone.
The timing for the fuel and electricity price increases could not have been worse with the new year upon us and belts being tightened so that enough money is available for children’s schooling and the holidays. The government should understand that without any moves to avert price hikes it opens itself up to economic disarray. Although transport fares have been regulated there is nothing that can protect the consumer from consumer good price hikes brought by opportunistic businesses. Regulatory bodies need to follow up on these matters and make sure that the consumer is not exposed to unnecessary abuses.
For sure the government cannot avert a situation that is dictated by international market forces, but it can control what goes on within Ethiopia. Speculation should be seen as a crime rather than business savvy.
The government should know that it is not dealing with inflation alone, it is fighting inflation in a poverty stricken nation where most of the population earns below one dollar a day. Inflation is a combination of two occurrences, one being a significant rise in disposable income, thus triggering an unusual increase in prices. Simply put, inflation is when too much money is chasing too few goods.
Had the Ethiopian economy been healthy, reducing government subsidies on fuel would have been fine, but there is a need to protect the vulnerable masses from the price hike from eating away their meager incomes. We need to come up with economic reforms that are practical rather than become a burden on the economy in the long run. Quick fixes are not solutions for long term economic health.