WFP Ethiopia Market Observatory, March 2022 – Ethiopia
• Inflation: Inflation in Ethiopia has remained in double digits for the past three years, despite government efforts to contain inflation to single digits. Headline inflation decreased slightly from 34.5% in January 2022 to 33.6% in February 2022; however, food inflation increased mainly due to the rise in the indices for bread and cereals, and fats and oils, pushing food inflation from 39.9% in January 2022 to 41.9% in February, the second highest rate in a decade. The highest food inflation in February 2022 was recorded in Harari (49.9%), Gambela (48.3%) and Benishangul Gumuz (47.7%).
• Exchange rate: The National Bank of Ethiopia slowed the creeping devaluation rate in February and March, with 1USD = 50.92 ETB in March. On the parallel market, 1USD was exchanged for 64 ETB in February 2022.
• Implication of the war in Ukraine on food security in Ethiopia: the prices of fuel, foodstuffs (wheat and vegetable oil), fertilizers, steel and iron have increased on international markets since the beginning of the war. war. Ethiopia imports large quantities of wheat, with about 25 percent of domestic wheat demand being met through imports. World market wheat price transmission is expected to be severe in the Somali region. The price of fertilizers has almost tripled, which can prevent farmers from using fertilizers, with negative repercussions on production and food prices. Rising iron and steel prices are expected to dampen job opportunities in the construction sector. As the Government of Ethiopia (GoE) moves away from fuel subsidies, a spike in fuel prices at the pump will further drive up the cost of living, both through food prices and transportation costs. fuel related to the supply chain.
• Prices in conflict-affected areas in northern Ethiopia: Compared to prices in Dessie (benchmark market), maize, sorghum and wheat prices are 51, 39 and 21% higher in Mekelle . Imported products such as rice and edible oil are sold at 166% and 141% higher prices. A similar trend was recorded in Afar in the markets of Sekota and Chifra, with higher prices for maize and sorghum observed compared to the markets of Dessie.
• Terms of trade (measure of purchasing power): in February 2022, an average-sized goat in the Kebridehar market in the Somali region could only bring 62 kg of maize, compared to 118 kg at the same period last year, when only 54 kg of wheat flour could be purchased compared to 79 kg in February 2021.
• Market and food security outlook: underpinned by the disruptions due to the war in Ukraine, the massive supply of funds to finance the budget deficit, the loss of production and the disruption of trade due to the ongoing conflict in the northern Ethiopia, the expected peak of fuel pump prices and the upward trend in food and non-food prices (including fertilizers, steel and iron, vegetable oil, etc. ) on the international market are expected to drive inflation to even higher levels, worsening food access for market-dependent households.