Food prices soar as war ravages Ethiopia

Ethiopia’s 10-month war has come at a huge human cost, with thousands killed, millions displaced and many in desperate need of assistance.

But that’s not the only damage being done to Africa’s second most populous nation – the war has incurred a huge economic cost, too, that could take years to repair.

In the capital Addis Ababa, 26-year-old Tigist, who didn’t want her full name to be used, says her monthly expenses have doubled for two reasons: the war that broke out in the northern region of Tigray in November and the coronavirus pandemic.

“Before Covid and the conflict, I would pay 1,000 birr [about $22; £16] each month for groceries. Now I spend 2,000 birr,” she says. “Things are more expensive now – phones, food and clothes.”

Official statistics show the cost of basic consumer goods has indeed gone up in Ethiopia – they were on average around a quarter more expensive in July than a year earlier.

Tigist is working as a supermarket cashier to support her family. She’s responsible for the food shopping while her brother covers the rent.

“Also, the dollar exchange has not been good,” she adds. “Last year, for $1 you would get 35 birr, now you get 45.”

Faisal Roble, a US-based analyst who specialises in the Horn of Africa, says that spending on the war effort “has really negatively impacted Ethiopia’s capacity to access dollars”, and has caused the exchange rate to deteriorate.

It is not clear how much the war has cost but Trading Economics forecasts military expenditure will reach $502m (£365m) by the end of the year, up from $460m last year.

Last week, UN secretary general Antonio Guterres said the conflict had “drained over a billion dollars from the country’s coffers”.

Prior to the global pandemic and the war, Ethiopia’s economy was one of the fastest-growing in the region, expanding by an average of 10% a year in the decade to 2019, according to the World Bank.

While Tigist is referring to the official rate available in banks, the birr has fallen even further in the informal market, Mr Roble says, and has now reached 67 birr against the dollar.

He adds that business owners in the country are nervous about the worsening security situation as the war spreads beyond Tigray and into the neighbouring regions of Afar and Amhara.

Many are draining their accounts and taking their cash to money traders on the border with the self-declared republic of Somaliland, and that’s forcing the birr’s value to drop even lower, Mr Roble says.