For a regular customer of Behil Restaurant, one of the three such businesses adjacent to Ras Hotel on Gambia Street, the recent change on the menu is obvious not on the cover or design of the book sized brown-leather menu, but in the food prices inside.

Out of the three pages of food, one can observe that previous prices on six food types have been cancelled out with a red marker with new prices written over them. However, the price increase has not affected the cost of Tibs Firfir and Sega Firfir. The increase is mostly seen in the menu’s eggs category and Italian specialities.

Behil increased its meal prices a few days after the fuel price adjustments, which were made on August 27, 2006. Such quick changes were not seen to be made after the first fuel price increment three months ago. According to the owner of the restaurant, Ghion Issayas the reason for his decision of not getting into the trend of food price adjustment at the time was simply because he thought, “a better day will come.”

He believes that he would make up for any loss by sustaining the number of his customers and the consistent income he gains from their visits. However, his decision did not last longer than three months, for according to Ghion, the second fuel price adjustment, which put the price on kerosene up by 18.8pc, from 3.45 Br per litre, raised the question of survival.

To make matters worse, he is not only affected by the fuel price increase for transportation, but also by the fact that he has six kerosene stoves in the restaurant’s kitchen.

Moreover, news from the market about food prices is not making Ghion any happier. According to the monthly Consumer Price Index (CPI) of the Central Statistical Agency, released on August 15, 2006, the July 2006 food index increased by 13.3pc from the same period last year.

CPI measures the average changes in the prices that consumers pay for goods and services. The July 2006 figure coincided with Behil’s latest increase in prices, which ranged from eight to 13.3pc from previous prices.

According to the CPI, all food item prices have increased, except the 4.4pc decline seen in spices. Among the food items, the highest increase registered was seen on vegetable and fruit prices with a 38.9pc rise; while the lowest recorded price was that of oils and fats with only a one per cent increase.

Ghion, who buys the food items for the restaurant, was faced by the rise in the prices almost every day. He said that a quintal of teff that he used to purchase for 430 Br just a few months ago now costs 530 Br.

“I bought a tray of 33 eggs with 13 Br, but now the price has gone up to 24 Br,” he told Fortune. “A kilo of Chikena Siga (tender meat) used to be purchased for 28 Br, but currently, the price has reached 34 Br.”     

An economist attributed the growth in demand on both the local and international level for the increase in food prices.

According to Dr Tekie Alemu, a lecturer at the Addis Abeba University, Faculty of Business and Economics, the growth in demand has contributed to the price climb, which creates inflation and the costliness of everyday life. He explained that if the prices that quoted on the CPI showed an increase for the last six months there is inflation; according to the latest CPI, there has been a price increment for the last eight consecutive months.

Tekie said that there is not one country in the world that does not have inflation, but the danger might come when the inflation goes to double digits. On its quarterly bulletin of the macroeconomic performance of the Ethiopian economy, the Ethiopian Economic Association stated that the annualised inflation rate reached 12pc in the third quarter of 2005/06; Tekie explained that inflation occurs when the demand-pull or cost-push theoretical concepts were to happen.

The demand-pull happens when the capacity of buying increases. Cost-push occurs when the production cost is inflicted on the price. He categorized the increase of the fuel price as being cost-push; he also said that in the Ethiopian context, the two have combined to contribute to inflation. 

Some restaurant owners, who face the same effects of inflation as Ghion, are still wondering how to come up with a solution. For fear of losing customers, they have not reacted as boldly as he has in increasing food prices.

Arada Bar and Restaurant, located in the Arada Building on Cunningham Street, has been in the business for the past eight years. It opened its first branch in April 2006 near Atlas Hotel, on Mickey Leland Road. Since its opening, the Restaurant has readjusted its food prices in accordance to market prices. However, its latest price rise was made eight months ago.

Getamesay Hailemichael, owner of Arada, told Fortune that though the fuel and food item prices have been increasing since the last adjustment, he does not dare to increase the meal prices in thoughts of winning a stiff competition. There are nine dining places, including Arada, in the same building, with some of them also serving as cafes and bars. Getamesay fears that due to the current life costliness, he might lose his customers if they increase their prices.

Enat Gu’ada, a famous eatery located near the Catering and Tourism Trainig Institute around Mexico Square, is also one of those restaurants that are not significantly increasing their prices for similar reasons.

Yesrom Abebe, the head waiter and son of the owner, said that their restaurant only made a one Birr increase on each of its meals, with the prices ranging from six Birr to 15 Br. He simply wondered who could be courageous enough to actually make great price adjustments on meals, when their own customers are complaining of the one Birr increment.

At Arada, Getamesay said that the increase in his restaurant’s costs has severely affected the profits of the restaurant; nevertheless, he declined revealing the figures of their proceeds.

“If things continue like this, we might have to start laying off employees from the 26 currently working in the restaurant,” he said.  

Arada was also forced to remove some of the meals provided in its menu. Nile perch, roast chicken and beef dishes are no longer served. All these three meals were the most expensive dishes in the restaurant, costing 30 Br each. That was when Getamesay was buying a chicken for 17 Br, an amount that is the price of the meal itself; one kilogram of beef and Nile perch, used to cost 12 and 27 Br respectively. They now cost 18 and 47 Br. The cheapest price in the restaurant, which is at eight Birr, is offered for the soup.

Ghion and Getamesay suggested two solutions to the problem at hand. First, the government should increase employees’ salaries; according to them, when employees have a capacity of paying for the meals, then it will be safe for them to increase the price of their food without any uncertainty. Second; they suggested that the government involve itself in trying to stabilize the market by regulating prices.

An economist shared the same views on the government’s role in stabilizing the market price. Dr Tekie told Fortune that when demand is high, the government could sell the item if it is available in its stock; the government has also made administrative measures on the state owned factories by increasing or decreasing production according to the demand.

“However, if the government interfered on setting the market price, it would turn into a command economy, contrary to what this government currently follows: a market economy,” he said.

The economist recommended the dissemination of accurate information about the price of items as being a third solution for stabilizing the market. He argued that a market is very sensitive to speculations. Some individuals, who have a stake on the issue, might speculate about the expensiveness of an item resulting in the rise of demand among consumers, the economist explained. To tackle such a problem, Tekie suggested that the government should provide the correct information to the public.