To those who followed the debate in Parliament earlier last week, on the Prime Minister’s half-year report that was very much focused on the economy, they would certainly get lost should they try to make ideological sense out of the various political parties represented there, and their policy leanings.

Those known to have leftist tendencies were observed fighting on the side of a liberal policy agenda, while others who often swear to be liberals seen arguing for heavy handed state intervention in the economy in order to stabilize prices, and “fight blood sucking businesses”. Take, for instance, Merera Gudina (MP-UEDF), he was happy that the state is subsidizing prices of consumable goods such as wheat and edible oil, while Bulcha Demekssa (MP-OFDM), who is known for his liberal outlook in economic management and as an ardent believer in the magic of the market, wanted the state to buy wheat from abroad and sell it to major businesses in the hope that the latter distribute it to the demanding public. This was indeed a contradiction to other points he has made last week in opposing temptation by the state to control prices.
 

Some of the other prescriptions offered by opposition MPs were simply hilarious; from an MP who blamed hot climate for raising prices to Merera’s (PhD) claim that whatever data was reported by Prime Minister Meles Zenawi, there is a good chance that it was “cooked”. He could hardly have evidence to substantiate his claim; no wonder he was brushed aside - deservedly - by the Prime Minister. Another MP blamed the administration of Revolutionary Democrats for failing to extract oil; he advised, rather strongly, for the government to seek foreign assistance in expertise - as it usually does with money and food aid - to drill oil for export. That way, the MP argued, the government would be in a position to stabilise prices with an inflow of foreign currency to the country.

Another MP, representing a self describing ‘Parliamentary Group’, noted that everything else in Ethiopia has been hit by escalating prices but “air”. Bizarrely, he claimed that the changing climate is one factor that has caused raising prices.
 

Aside from the parliamentary polemics and ideological chaos, opposition MPs seemed to have achieved a great deal in the form than substance.
 

They have shown to the Prime Minister and his camp that appearing before Parliament is not like going to a picnic. He could indeed be taken to a task to explain his policies. Suffice Ledetu Ayalew’s (MP-UEDP) outstanding performance as that of a rather angry-sounding MP representing a political party he no longer has a backing from, Temesgen Zewdie. Temsegen vociferously challenged the Prime Minister and said that it was not enough to refer to just growth, (projected by the IMF to be 9.6pc in 2008 as opposed to the government’s 10.8pc) while ignoring how bad Ethiopia’s standing is in United Nation’s Human Development Index (HDI).

Opposition MPs were right in demanding explanations on why the central bank is inept in the face of scourging inflation and how much of an impact his decision to intervene in Somalia is causing prices to go to through roof on the home front, as their disappointment that his report overlooked the looming humanitarian crises in southern, eastern and north-eastern parts of the country is very much understandable. That the Prime Minister chose not to respond to these concerns sufficiently or the Deputy Speaker of Parliament, Shetaye Menale, appeared nervous in limiting their voices does not make them less relevant.
 

It is simply too bad and unfortunate of the Revolutionary Democrats; whatever gain in growth they have registered, particularly in recent years, they cannot help but see it clouded by one irritation after another. Regardless, and for a sober reflection beyond political rhetoric, Ethiopia’s economy has registered a steady growth over the past four years and since major contraction was seen in 2002/03 when the economy had a bite from famine. It should not however overshadow their accomplishments in the economic front, although they should deserve showers of criticisms in other areas such as their unpleasant records in human rights situation and abysmal performance in ensuring rule of law.
 

A recent report by the World Bank defends their economic record: “Ethiopia’s economy has made some major strides forward - growth has been strong, the private sector contribution to output and investment has expanded, some key exports have taken off . . . the composition of recent growth reflects good performance across sectors, as does the increasing importance of the private and non-agricultural sectors as the driver of economic activity.”

It is true that the sector that employs 85pc of the population, agriculture, has contributed 47pc of the GDP in 2006, for instance; a significant degree of concentration to one sector that exposes the economy to shocks such as drought. To the credit of Revolutionary Democrats, the economy is going through major structural transformation, particularly since 2000: The share of industry and services is growing father than agriculture and private investment’s share of the GDP now exceeds 15pc, and accounts for about 59pc of total investment. This private investment and consumption represent about 80pc of gross domestic expenditure, according to the World Bank.
 

The government of the Revolutionary Democrats is acclaimed for following highly disciplined fiscal policy. The effort is paying off: Budget deficit is narrowing from 7.4pc of the GDP in 2006 to less than five per cent last year, although national revenue is declining from to 12.5pc of the GDP in 2006 from 13pc in the previous year. Ethiopia’s external debt, too, is falling down significantly, from 7.2 billion dollars in 2004/05 to six billion dollars the following year, in part thanks to the relief provided through the Heavily Indebted Poor Countries (HIPC) initiative.
 

It is in the country’s current account where the challenges are always visible: In 2006, to which a latest figure is obtained by this newspaper, the amount reached 11.6pc of the GDP and forecasted by analysts to nearly 13pc in 2007, owing it to a growing domestic demand that pushed imports to a record high of over four billion dollars. Although exports are growing steadily (37pc in 2005/06, 20pc in 2006/07, and 27pc during the first half year of 2007/08, according to Trade and Industry Minister Girma Birru), they fall short in bridging the trade deficit; expectedly, Ethiopia’s balance of trade was at negative three per cent last year. Neither is the projection for the coming four years positive. Analysts foresee that a growing trade deficit is bad to the over all economy is pushing the country’s balance pf payment into a negative, thus affecting the foreign currency reserve estimated to reach 1.4 billion dollars, an amount that is believed to cover three months of import now.
 

Domestic appetite for foreign imports (largely consumed by raising cost of oil and steel in the international market) is in fact a major source of price escalation in the country; economists describe this phenomenon as “imported inflation”. It shows a global development where prices of commodities are going up on the international market with a mixed bag of results to different countries. For instance, oil producing countries find the jump in oil price per barrel from 20 dollars five years ago to a record high of 109 dollars last week a bonanza, as importing countries are painfully experiencing its punch. Unfortunately, Ethiopia belongs in the latter group; and it has a government that spoils its citizens with 3.1 billion Br worth of subsidy last year.
 

The Prime Minister’s attempt in trying to explain global phenomenon in upward prices has not been well received by opposition MPs such as Temesgen and Bulcha, the latter strongly argued that there is a domestic face to the looming inflation. Interestingly, a random survey conducted by this newspaper last week revealed that members of the public are not as sceptical as the MPs. They seem to understand and accept the global dimension of the increasing living standard. True, inflation is becoming thorn in the flesh of even developing economies such as the United States, United Kingdom and Germany. Since December 2005, it has become a reality to Ethiopia, and it is very depressing.

That the Prime Minister declared last week his administration has no worse enemy today than inflation should be no surprise, except that he is a bit late with his declaration. He may find a solace perhaps knowing that there was a government back in the early 1970s known as “Nixon Administration” that has had a striking parallel with what is happening here.
 

Like President Nixon, Meles finds himself under immense political pressure caused by a raising cost of living that is obliterating peoples’ income. And it is happening at a time of economic recovery in both situations, although Meles is determined to keep soldiers in neighbouring Somalia the same way Nixon was in Vietnam, though the reasons of their involvement varies. In both cases, surtax was imposed (10pc in the US then and 15pc in Ethiopia), and in both economies, unemployment and inflation go hand in hand, leading to what economists call “stagflation”.

Whether or not Ethiopia’s economic woes reached to be described stagflation is not clear. Nevertheless, should MP Bulcha get concerned with short term measures being taken by this administration may involve some sort of price controls, it could not probably be without reasons because a day after the Parliamentary debate, State Minister for Trade and Industry Ahmed Tusa ordered, through the state media, all businesses to disclose prices in visible locations. Could this be a beginning of a nervous crackdown on businesses that are being popularly - but unfortunately - bashed as “blood sucking monsters”? Bulcha rightly warned that controlling prices has never worked in any country; a strong statement considering that capitalist America’s attempt in fixing wages and prices under Nixon in the early 1970s did not.     
 

“The market will always undermine any attempt at control,” Alen Greenspan, the retired chairman of the US Federal Reserves, after 18 years service, observed.
 

Inflation is bad not only because it overshadows whatever the Revolutionary Democrats have gained in structural transformation of the economy, as the Prime Minister argued. It has a series negative impact on the poverty reduction and growth strategy they have developed for five years, which assumed that success comes considering that inflation remains below or at seven per cent during the entire target years. Alas, upward trend in prices began in December 2005, and year-on-year average reached at 22.9pc last week, according to Consumer Price Index (CPI) released by the Ethiopian Statistics Agency (ESA).
 

The debate should be focused on best courses of action, an idea that seems alien to many of the MPs. Hardly any of them did go farther a blame game and produced policy measures that helps to fight inflations. Should they think theirs is a job solely in criticizing the government, they have succeeded for they put the Prime Minister under storm. Gladly, the Prime Minister came to see that Ethiopia’s inflation can not be contained with transitory measures such as subsidising oil and food stuff that cost his administration 4.2 billion Br over the years. He rightly admitted that these momentary measures have affected the country’s macro economic stability and sustainable growth; in a way, it has had inflationary element.
 

Contrary to his firm position last year that “Ethiopia’s inflation is not monetary phenomenon”, he conceded last week that monetary growth is indeed one of the four reasons for current inflation, along with underdeveloped commodities market and cartel businesses. The figures support that, too. The volume of monetary circulation in the economy grew by 19pc to reach 55 billion Br this year. Agreeably, he came to accept that in the long term, it is fiscal and monetary policy measures that need to be taken to control inflation. Although how he plans to gamble in his fiscal policy measures is yet to be seen; his lifting off of value added and turn over taxes could be a good start. Nevertheless, the battle on the monetary front has begun. Last week, reserves banks need to set aside grew to 15pc, an increase of five per cent for the second time since July 2007.   

When one sees much of the money comes from commercial lending from private and state owned banks, although the private’s share of the eight billion Birr advanced to private investors in the first half of the current fiscal year reaches 55pc, it is indeed a sensible direction. This is when Revolutionary Democrats become advocates of liberal economic policy prescriptions; and it is good.