The Ethiopian government has announced its plans to allocate 240 billion birr ($2.9 billion) for social spending, to ease the rising cost of living due to ongoing economic reforms.
In an exclusive interview with Bloomberg, Eyob Tekalign Tolina, state minister in the finance ministry, said that the government has learnt from the experience of other countries and has prepared for the inflationary effect these reforms will cause.
“We will go into the parliament with a supplementary budget of about 550 billion birrs ($5.9 billion), and about 40 percent of this will be allocated to subsidise essential commodities, petroleum, and the price of fertiliser to farmers. We will also provide direct support to citizens through a safety net programme,” he stated.
Recently, Ethiopia floated the Ethiopian Birr and shifted its exchange rate regime to an independent, market-determined system right before securing a four-year IMF loan worth $3.4 billion and a $1.5 billion budget support from the World Bank.
After floating the currency, the Birr’s value against the dollar has slumped by 70 percent to 101.43 yesterday August 6, from 57.48/$ quoted on Friday, July 26, 2024, data from the Commercial Bank of Ethiopia shows.
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Despite Ethiopia’s inflation rate declining to 19.9 percent in June from 23.3 percent in May 2024, IMF expects inflation to climb to 30 percent in 2024 before easing to 16.2 percent in 2025 as a result of these economic reforms.
In February 2024, the Federal Government of Nigeria announced its plans to disburse N25,000 each to 15 million Nigerian households as part of its efforts to ease the effect of heightened inflation caused by major economic reforms like the fuel subsidy adjustment and the floating of the naira.
Since floating the naira in June 2023, Nigeria’s inflation has climbed to a 28-year high of 34.19 percent in June 2024, eroding Nigerians’ purchasing power and increasing the cost of living by 50 percent in one year.
Wale Edun, Nigeria’s minister of finance and the coordinating minister of the economy earlier stated that the government planned to provide an additional 60,000 metric tons of grains for food and feed mills and distribute N50 billion non-refundable grants to at least 1000 artisans, traders, and nano businesses in all 774 government areas in the country.
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Despite these palliative measures, Nigerians have taken to the streets to protest against economic insecurity and the cost-of-living crisis, tagged #EndBadGovernance.
Experts have said that although the reforms were inevitable, they were hurriedly made without considering their ripple effects on the citizens, especially the vulnerable.
“We have a government that has good intentions about what it wants to do to fix the economy, but in the actual delivery, I think they fell short of the expectations that they created,” Adeola Adenikinju, president of the Nigerian Economic Society earlier told BusinessDay.
“The administration could do better with regards to the speed of delivering mitigating measures to ease the pains of the reforms,” Muda Yusuf, chief executive officer of the Centre for Promotion of Private Enterprises (CPPE), said in an earlier report.
SBM Intelligence, an Africa-focused market and security intelligence consultancy, has warned the federal government of potential trouble should it fail to address the demands of protesters.
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