Addisfortune.com

   
   
     
Google
 
 

Subscribe

Facebook

RSS

 

Twitter

Follow us on Twitter
 
 
 
 
 
 
 

Subscribe

 News Feed

 Column Feed

 

 Facebook
Follow us on Twitter  Twitter
 
 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
 
 
 
 

 

 

 

 

 

 

 

 

 

 
 
 
 
 
 
 
 

Share

THE FINE LINE
 

 

Long after macroeconomic policymakers declared "Mission Accomplished" in arresting the tide of inflation, sceptics were reluctant to accept that they were proven wrong. They had held their foot to the ground claiming that inflation was not out of the woods. Not yet, gossip heard repeatedly.

Well, it had once seemed that the administration did succeed in keeping inflation at bay.  Back in July and August 2010, it was indeed true the pace at which prices were escalating went down to single digits, true to the statement made by the Prime Minister.

Alas. To the disappointment of his administration, its critics were proven to be correct since September 2010; last week, the federal agency in charge of monitoring prices disclosed that headline inflation has picked up to a staggering 39.2pc. 

What causes prices to keep going up are reasons as many as the number of economists willing to speak on the subject, gossip noticed. One count has it that there are at least seven reasons, although the two (whether inflation in Ethiopia is imported or it is due to the administrationís fiscal expansion, hence monetary pressure) are the most controversial. There is a political significance behind any conclusion on either of the possibilities.

The Prime Minister and his macroeconomic advisors have been on the record for a couple of years (in fact up until recently) arguing that inflation was imported, only to be challenged by economists from the IMF that it is a largely monetary phenomenon. The contribution of the partly imported inflation could not be higher than 5pc, they claimed.

To the surprise of many, the Prime Minister came around during his appearance in Parliament in June to concede that broad money growth (which simply means the printing of notes by the Central Bank) has a lot more to do with inflation than what he originally had thought. He has also promised not to let his administration borrow from the Central Bank during the current fiscal year, while pledging to cut the growth of money in the economy below zero.

At the gossip corridors, these were thought to be promises too good to be true. Judging by the look of things from the start, those at the gossip corridors have reasons to be weary of their anticipation. The Central Bank is now in full gear to put out auctions to hire international printers to print 50 and 100 Br notes with values double the amount of three years ago, gossip disclosed. Back then, the Central Bank is believed to have printed notes worth between 100 million to 300 million Br.

Officials responsible for currency circulation have actually visited major note printers in France, the United Kingdom and Germany over the past couple of months, gossip revealed.

Subsequent to the massive devaluation of the Birr against a basket of major currencies, Ethiopians have seen the purchasing power of their currency dwindle by the day. They have reached at a point where one Birr buys nothing of value anymore; this was not a fact illusive to the central bank which introduced a coin with the value of one Birr, circulating parallel with the note.

Nonetheless, people have to carry a bag full of money to buy assets of real value. Whether or not it is time perhaps to introduce new bills with a value of 500 Br and 1,000 Br is strongly being contemplated by the authorities at the Central Bank, claims gossip. However, this is an idea which may not win a nod from a place of the highest order, for fear of fuelling inflation, gossip claims.

 
 
 
 
 
 
   
 
 
 

ARCHIVESABOUT FORTUNE  / FEEDBACK  
CLASSIFIED ADS / ADVERTISE CONTACT US
CONTRIBUTE  / GUEST BOOK / FORTUNE FORUM

       Home Page / Fortune News / News In Brief / Agenda / Editor's Note / Opinion / Commentary / View Point

 Cartoons / Comic Strips / Gossip

   Terms & Conditions / Privacy
© 2007 AddisFortune.com