Market Watch

Ethiopia | March 2023

HIGHLIGHTS
• Inflation: Headline inflation was 32.0 percent in February 2023, almost three times the Government of Ethiopia’s (GoE) annual
average inflation target of 11.9 percent. The persistent inflationary pressure is driven by a range of factors including the
mismatch between aggregate supply and demand, the unrest in several parts of the country, the high commodity prices in the
global market, and the loose monetary and fiscal policies. After remaining at more than 30 percent for 19 consecutive months,
food inflation slightly dipped to 29.6 percent in February 2023.

• Exchange rates: The official exchange rate published by the National Bank of Ethiopia (NBE) indicates that the Ethiopian Birr
exchanged at 53.62 Birr to the United States Dollar (USD) while the parallel rate offered around 95 Birr to the dollar in February
2023. Over the past 12 months, the official exchange rate of the Birr has lost its value by 6.5 percent against the USD while the
parallel market jumped by 48.4 percent.

• Fuel: As part of the gradual process of lifting the subsidy on the fuel price, the GoE has made its third-round price revision that
comes to effect as of January 2023. In Addis Ababa, the prices of diesel and benzene has been revised upwards to 67.3
Birr/Litre and 61.29 Birr/Litre, an increase by 12 percent and 7 percent, respectively. With fuel and electricity accounting for 10
percent of the national Consumer Price Index (CPI), an increase in the fuel price can easily translate to a direct rise in inflation.

• The teff and wheat conundrum: Although February and March are months in which the previous season’s staple food
harvest comes on to the market and dampen food prices, the price of Teff sharply rose to a record level in March 2023. It was
selling at 67 percent higher than the prices one year ago and 123 percent above the five-year average for the month. Out of a
total of 15.3 million MT of wheat predicted to be available from domestic production in the agricultural year 2022/23, the GoE
planned to export 3.2 million MT. The price cap introduced by the government, which later is reported to have been lifted,
caused disruption in the availability and price of wheat.

• Prices in conflict affected areas in Tigray: Since the signing of the peace agreement between the GoE and TPLF, prices of
sorghum, maize, and teff decreased by 22 percent, 42 percent, and 12 percent, respectively. The wage to cereal terms of trade
(ToT) exhibited improvement. However, the purchasing power of daily labourers in February 2023 remains far below where it
was one year ago.

• Terms of Trade (purchasing power) in Somali region: The failed five consecutives rainy seasons in Somali region resulted in
poor livestock body condition that led to a decrease in their demand and price. On the other hand, the prices of imported
foods sustained an aggressive increase due to the continued persistent inflationary pressures in the economy and continued
depreciation of Birr against US dollar.

• Market and food security outlook: There are no signs indicating that the underlying inflationary pressure on food prices will
be abated soon.
 Monthly Market Watch | Ethiopia CO | March 2023 Page 2 of 22

1. Inflation
1.1 Headline inflation dips despite the rise of non-food items’ index

Figure 1 – The Consumer price index rose by 32.0 percent in February 2023 from a year
earlier according to data released by the Ethiopian Statistics Services. This is 0.1percentage
higher than the previous month. This means that the average household will spend 32
percent more money to purchase the same basket of goods in February 2023 than in the
same month of the previous year. However, this aggregate measure can mask large
differences in the actual cost of living faced by households with different spending
patterns.

The year-on year headline inflation that hit record level in a decade at 37.2 percent in May
2022 tended downwards between June and September and resurged atypically in the
ensuing food harvest months of October and November. The inflation rate recorded in the
month is far above the annual average inflation planned by the GoE at 11.9 percent for the
2022/23 Fiscal year. With eight months of the fiscal year elapsed, the average inflation rate
between July 2022 and February 2023 stubbornly stood at 32.9 percent. The world-
economic-situation-and-prospects published by International Monetary Fund (IMF)
forecasted that the inflation in Ethiopia could average 24.9 percent in 2023 and 16.2
percent in 2024.1

Despite the monetary and fiscal policies pursued by the Government of Ethiopia (GoE) to
maintain price stability, the inflation rate remained in double digit over the past 51 months
in a row. Over the past 19 consecutive months since August 2021, year on-year inflation
stayed above 30 percent and averaged at 33.8 percent. The persistent inflationary
pressure is driven by a range of factors including, but not limited to, mismatch in aggregate
supply and demand, unrest in some parts of the country, high commodity prices in the
global market, and loose monetary and fiscal policies2. Broad money supply (M2) continues
to be a challenge to the effort to contain the galloping inflation as the Government has
little alternative sources to finance an enlarged budget deficit. According to the report
published by National Bank of Ethiopia (NBE), the government has taken nearly 100 billion
birr from the National Bank as a direct loan (by printing money) during the first two
quarters of the 2022/23 fiscal year3. In the previous fiscal year, 2021/22, the total amount
of loan taken from the NBE was amounting to 76 billion Birr. Thus, the amount of direct
loans given in the last half of the fiscal year (July to December) is 32 percent higher than
the corresponding value taken in the entire fiscal year of the previous year. The
government is printing more money than the country’s annual economic growth would
allow, which fuels inflation further.

1
https://desapublications.un.org/publications/world-economic-situation-and-prospects-
2023#:~:text=The%20World%20Economic%20Situation%20and,headwinds%20will%20begin%20to%20subside.

2
https://nbebank.com/wp-content/uploads/pdf/annualbulletin/Annual%20Report%202020-2021/2021-
22%20Annual%20report.pdf
3
https://nbe.gov.et/quarterly-bulletin/

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Monthly Market Watch | Ethiopia CO | March 2023 Page 3 of 22

Figure 1: Trends of Year-on-year Inflation (Jan 2018 -Feb 2023)

50.0

45.0

40.0

35.0

30.0

25.0

20.0

15.0

10.0

5.0

0.0
Jul-18

Jul-19

Jul-20

Jul-21

Jul-22
Apr-18

Apr-19

Apr-20

Apr-21

Apr-22
Jan-18

Jan-19

Jan-20

Jan-21

Jan-22

Jan-23
Oct-18

Oct-19

Oct-20

Oct-21

Oct-22
Headline Food Non-food

Source: Ethiopian Statistics Service Consumer Price Index (CPI) –February 2023

1.2 Food inflation is moderating in February while non-food inflation continued

expanding

The food CPI, which constitutes around 54 percent of the overall CPI basket, has been
moving far above the non-food CPI for the past 43 months between March 2019 to
September 2022 until it was overtaken by the non-food index in October 2023. The food
inflation, after remaining at more than 30 percent for 19 months in a row, slightly dipped
to 29.6 percent in February 2023. On the other hand, the upward pressure on the index
for non-food continued since May 2021. Non-food inflation was 35.6 percent in February
2023. The contribution of non-food items to the overall inflation is bulging, with large price
jumps seen for fuel, transport, alcoholic beverages, furnishings, and housing.

Figure 2 - Despite a decline in year-on-year food inflation, month-on-month inflation

increased by 1.6 percent in February, meaning that prices for baskets of food items
commonly consumed in Ethiopia were higher than they were in January. After aggressive
increase between February 2022 and September 2022, the month on-month increase in
the food index slowed down until December 2022 and once more accelerated, suggesting
that the price of food picked earlier than the season.

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Monthly Market Watch | Ethiopia CO | March 2023 Page 4 of 22

Figure 2: Trends of Month-on-Month change on food CPI

Source: Ethiopian Statistics Services Consumer Price Index (CPI)

1.3 Price indices of fruits, meat, and milk showed the highest year on year increase
in February 2023

Figure 3 - price indices of fruits, meat, milk, and oils and fats registered substantial increase
in February as compared to the same time last year.

Within the CPI, the index for fruits saw the largest price jump in February, rising 54 percent
year on year. For example, in the Addis Ababa market, the prices of banana, orange, and
avocado increased by 69 percent, 79 percent, and 49 percent. Meat and milk and dairy
products were the divisions with the next-largest price increase at 43.1 percent and 39.3
percent, respectively. The fact that the price indices of these nutritious food items are
increasing at faster rate makes them inaccessible to the poor households.
The price of cereals and bread, that represent about 17.4 percent of the overall CPI
weight, rose 30.9 percent in the year to February. This implies that the consistent price
increase in cereals have heavy weight on the exacerbation of inflation in the country.
Oils and fats - The index for oils and fats, that represent about 4.3 percent of the overall
CPI, rose by 34.4 percent between February 2022 and February 2023, about 5 percentage
points above the food inflation rate for the month. Despite the price of vegetable oil in the
global market continued to drop, the prices in the local market have not been declining
correspondingly. This may be because of the foreign currency crunch that coerces traders
to import by sourcing foreign currency from the parallel market.

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Figure 3: Year-on-year changes in the CPI of food groups, February 2023

60.0

50.0

40.0

30.0
53.9
20.0 43.0
39.3
34.4
30.9
26.6 25.6
10.0

0.0
Bread and Meat Milk, cheese Oils and fats Fruit Vegetables Sugar, jam,
Cereals and eggs honey,
chocolate.

Source: Ethiopian Statistics Services Consumer Price Index (CPI) – February 2023

1.4 Inflation reported highest in Afar, Diredawa, and Somali regions

Figure 4 - Food inflation hit the highest year-on-year increase in Afar (42.6 percent),
followed by Diredawa (41.9 percent) and Somali (39.8 percent). The frequent disruption of
the supply chain may be the main driver of the inflation in these three regions.

Figure 4: Year-on-Year food inflation by region, February 2023

45.0
40.0
35.0
30.0
25.0
20.0 42.6 41.9
37.1 39.8
31.8 33.8 32.5
15.0 29.5 28.5
27.0
10.0
5.0
0.0

Source: Ethiopian Statistics Services Consumer Price Index (CPI) - February 2023

1.4 Government measures to address inflation

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Monthly Market Watch | Ethiopia CO | March 2023 Page 6 of 22

• Addis Ababa city administration has announced that extension of the measure
banning landlords to increase house rent price for additional three months (until
June 2023). The resolution was introduced in August 2021 and renewed every three
months bans landlords in the capital from increasing house rents. As house rents
are very high and have been increasing steadily in Addis Ababa, these measures
are expected to relieve employed workers and self-employed poor households
from increased burden of rent.
• The GoE has maintained targeted fuel subsidies for public transport but is in the
process of phasing out the subsidies on fuel and electricity.

2. Currency Exchange
Rates
2.1 The gap between the official and parallel exchange rates of Birr to the USD
remained at elevated level in February

The NBE has been implementing creeping devaluation of Birr against a basket of major
currencies in 2020 and 2021. It slowed down the devaluation rate as of April 2022. The gap
between the parallel exchange rate and the official rate continued to diverge thereafter.
The past one year saw unprecedented devaluation of Birr in the parallel market. In March
2023, the official exchange rate was at 53.83 Birr to the USD while the parallel rate offers
around 100 Birr for the dollar. Figure 5 - Over the past 12 months, the official exchange
rate of the Birr lost 5.7 percent of its value against the USD. The depreciation on the parallel
market was 49.3 percent over the same period.
Figure 5: Trends of Official and Parallel market exchange rate (USD against Birr)
120

100

80

60

40

20

0
Jul-17

Jul-18

Jul-19

Jul-20

Jul-21

Jul-22
May-17

Nov-17

May-18

Nov-18

May-19

Nov-19

May-20

Nov-20

May-21

Nov-21

May-22

Nov-22
Jan-17
Mar-17

Sep-17

Jan-18
Mar-18

Sep-18

Jan-19
Mar-19

Sep-19

Jan-20
Mar-20

Sep-20

Jan-21
Mar-21

Sep-21

Jan-22
Mar-22

Sep-22

Jan-23
Mar-23

2017 2018 2019 2020 2021 2022

Parllel market Official

Source: NBE (Official) and WFP (Parallel)

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Monthly Market Watch | Ethiopia CO | March 2023 Page 7 of 22

The difference between the official exchange rate and the parallel markets, that had been
remained relatively at lower level (between 17 percent to 37 percent) in 2021, spiked in
April 2022 and continued to diverge in 2022. The gap between the official exchange rate
and the parallel market stood at 86 percent in March 2023. To narrow this gap, the
government had planned to implement a market-driven foreign exchange system by the
end of the last fiscal year, but the government's foreign exchange reserves did not grow as
expected, so it was delayed. The recently drafted second home grown economic reform
(HGER 2.0) elucidate that gradual unification of the two exchange rates is part of the
planned activities for the coming three years.

Figure 6: Trends of percentage difference between Parallel market and official

exchange rates (Birr against USD)

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%
Jul-19
Jul-17

Jul-18

Jul-20

Jul-21

Jul-22
Apr-17

Apr-18

Apr-19

Apr-20

Apr-21

Apr-22
Jan-17

Jan-18

Oct-18
Jan-19

Jan-20

Jan-21

Jan-22

Jan-23
Oct-17

Oct-19

Oct-20

Oct-21

Oct-22
Source: NBE and WFP

The depreciation of the Birr against major currencies is pushing up prices of imported food,
fuel, medicine and other goods and services in the local market. Plummeting foreign
currency reserves has dampened the import capacity of key commodities. To make things
worse, most of the importers rely on the parallel market to acquire foreign exchange which
dictates the actual selling prices of commodities in the market. This is particularly true in
Somali region where the population is dependent on import of food items via
Somalia/Somaliland.

2.2 Policy measures to ameliorate the challenges related to Foreign Currency

exchange and financial sector
• GoE is engaged in discussion with the Bretton wood institutions of World Bank and
International Monetary Fund about the possibility of funding the second home-
grown economic reform drafted by the GoE.
• NBE announced that banks should remit 70 percent of their foreign currency
earnings from different sources (export of goods and services, remittance, NGO

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 Monthly Market Watch | Ethiopia CO | March 2023 Page 8 of 22

transfer, etc) to NBE4. The remaining 30 percent of the forex will be shared between
the banks (10 percent) and the investors who brought the foreign currency (20
percent). In the previous revision of August 2021, the share that should be
surrendered to NBE had been raised from 30 percent to 50 percent. The
progressive increase in the share of NBE is to meet the increased need for foreign
currency for strategic purposes including debt service, imports of petroleum
products, pharmaceuticals.
• The GoE appointed a new governor to the NBE. The new governor revealed that
the NBE will focus on stabilization of prices and foreign currency, as well as a
healthy financial system as the basis of macroeconomic growth.
• In a bid to improve the forex revenue and access to finance, the GoE has
announced that it is planning to open-up the banking sector to foreigners as well.
The major drivers for the adoption of this measure are to improve efficiency in the
banking service, the transfer of technology and knowledge in the sector, enhancing
global competitiveness, and integrating Ethiopia’s economy into the global financial
system. According to the revised policy, foreign banks can open subsidiary arms
in Ethiopia, open branches in Ethiopia, and will also be allowed to acquire shares
in existing local banks5.

• In a bid to channel available foreign currency to the priority goods and services,
and discourage the parallel market, the Ministry of Finance has notified the NBE to
freeze the issuance of Letters of Credit (LC) for the import of 38 items identified as
non-priorities indefinitely. Among others, the items prohibited include drinks
(whiskey or beer and other alcoholic beverages), chewing gum, chocolate, water,
cigarettes, human and artificial hair, perfumes, sea foods, automobiles and
motorcycles, (except electric vehicles), and three-wheelers, etc.

• NBE issued a directive6 on the limits of Birr and foreign currency holding in the
territory of Ethiopia. According to the directive, a person entering and departing
from Ethiopia may hold up to maximum of Birr 3,000.00 (Birr Three Thousand) per
travel to and from Ethiopia7. A person residing in Ethiopia entering Ethiopia shall
convert all foreign currency he/she is carrying at an authorized forex bureau for
the equivalent sum in Birr, or deposit to his/her foreign currency account within 30
days of entry to the territory. However, he/she has to present custom declaration
if the foreign currency amount exceeds USD 4,000 (USD Four Thousand) or
equivalent in any other convertible foreign currency while depositing into foreign
currency account. Foreign nationals of Ethiopian Origin or Ethiopian National not
residing in Ethiopia who enter the territory carrying foreign currency and intended
to stay more than ninety days shall deposit the money into his/her Non-resident
(NR) foreign currency account. However, if the amount of the foreign currency
exceeds USD 10,000 (USD Ten Thousand) or equivalent in any other convertible
foreign currency, he/she has to present custom declaration to deposit or convert
it to Birr at an authorized forex bureau.
• The Ministry of Finance relaxed the Franco Valuta privilege to importers for basic
food items including edible oil, wheat, sugar, baby milk and rice. The privilege
allowed importers that have their own foreign currency to import these items free

4
https://nbebank.com/wp-content/uploads/pdf/directives/forex/fxd-79-2022.pdf
5
https://www.ethiopianreporter.com/111462/
6
https://nbebank.com/wp-content/uploads/pdf/directives/forex/fxd-81-22.pdf
7
However, a person travelling to Djibouti may hold up to a maximum amount of Birr 10,000 (Birr Ten
Thousand) per travel.

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 Monthly Market Watch | Ethiopia CO | March 2023 Page 9 of 22

of tax. National Bank of Ethiopia recently pointed out that the opening up of the
franco valuta privilege has already posed another unintended repercussion on the
foreign exchange market. The parallel market became a major source of forex for
Franco Valuta importers, which is alleged to have led to the spike in the exchange
rate of Birr against major currencies in the parallel market abruptly. Experts
suggest that, although goods are available in the market because of the Franco
valuta privilege, their prices are very high because of the expensive forex
acquisition costs and increasing global prices. While the parallel market provides
an avenue for businesses to access foreign currency, the price of imported goods
escalates exponentially as the importers pass on the higher rate of exchange in the
parallel market to the consumers. The NBE announced that it will reinstate the
scrutiny on the source of the foreign currency on those who are engaged in import
business using franco valuta. Traders who import foreign goods via Franco-Valuta
are required to submit a bank statement to NBE that confirms the amount of
dollars they have abroad.

3. Fuel
3.1 the Government introduced second round fuel price revision
Figure 7 - As part of the process of gradually lifting the subsidy on the fuel price, the GoE
has made its third-round price revision that comes into effect as of January 2023. In Addis
Ababa, the prices of diesel and benzene has been revised upwards to 67.3 Birr/Litre and
61.29 Birr/Litre, an increase by 12 percent and 7 percent, respectively. Over the past one
year between April 2022 and April 2023, the prices of diesel and benzene rose by a
staggering 133 percent and 93 percent, respectively.

Figure 7: Pumping prices of benzene and diesel in Addis Ababa (Birr/liter)

80

70

60

50
Birr/liter

40

30

20

10
Sep-17 Feb-19 Jun-20 Oct-21 Mar-23 Jul-24

Diesel Benzene
Source:
WFP Market Database, October 2022

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Monthly Market Watch | Ethiopia CO | March 2023 Page 10 of 22

3.2 Targeted Subsidy to public transport

Figure 8 - On the third round of fuel price revision that came to effect as of January 8, 2023,
slight increase has been made on the fuel price for public transport vehicles, which were
chosen to serve the public under the targeted subsidy scheme meant to benefit low-
income citizens. Accordingly, public transport vehicles will buy benzene and diesel at prices
28 percent and 34 percent lower than the normal pumping prices, respectively. However,
the exclusion of trucks and agriculture machines (tractors, water pump, etc.) from the
subsidy scheme is still an issue of concern that may contribute the exacerbation of
inflation. Subsidies for public transport vehicles is set to decline progressively every year,
and it will be completely lifted after the fifth year from now.

Figure 8: Pumping prices of benzene and diesel (Normal vs. Targeted Subsidy) in Addis
Ababa (Birr/liter)

80.00
67.30
61.29
60.00
44.62 43.94
40.00

20.00

0.00
Diesel Benzene

Normal price (Birr/liter) Targeted Subsidy Price (Birr/liter)

Source: WFP Market Database, March 2023

3.2 Fuel price in Ethiopia as compared to East African countries

Figure 9 and 10- In March 2023, the pump price of fuel in Ethiopia is still relatively cheaper
as compared to the corresponding prices in most of the East African countries. However,
the gap is getting narrowed from time to time as the domestic fuel subsidy on the Ethiopian
fuel is progressively removed. This is likely to lessen the illegal cross-border smuggling out
of fuel to neighbouring countries.

Figure 9: Diesel Prices (USD/Liter) in Some Figure 10: Gasoline Prices (USD/Liter) in Some
East African Countries East African Countries

1.80 1.701 1.80 1.66

1.60 1.37 1.37 1.41 1.60 1.36 1.38 1.41 1.43
1.27 1.33 1.40 1.25 1.26 1.34
1.40 1.14 1.04
1.20 1.20
0.90 1.00
1.00 0.80
0.80 0.60
0.60 0.40
0.40 0.20
0.20 0.00
0.00

Source: Global Petrol Prices: https://www.globalpetrolprices.com/diesel_prices/

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 Monthly Market Watch | Ethiopia CO | March 2023 Page 11 of 22

3.3 The rise in fuel price to exacerbate inflation further

With fuel and electricity accounting for 10 percent of the national CPI, an increase in the
fuel price can easily translate to a direct rise in the headline inflation. As fuel is pivotal in
every sector of the economy, it could also lead to second-order inflationary effects on food
and non-food costs as producers and traders transfer their fuel costs to consumers.
Production and distribution of food also has costs that are intrinsically tied to the fuel price
which leaves them with no alternative but to pass on at least some of the cost increases to
consumers.

4. The teff and wheat

conundrum
4.1 The price of Teff gone through the roof and hit a record high level in March 2023
Teff is the second most important cereal in Ethiopia after maize. The average annual
consumption of teff at national level is 39.6 kg per adult equivalent, which constitutes some
12 percent of the total calorie intake8. It is the most preferred grain to other grains but is,
in general, more widely consumed by the urban residents than by rural households.
Constituting around 28 percent of the dietary calorie intake, teff is the most important
calorie sources in urban Ethiopia. Accordingly, changes in the prices of teff have significant
impact on household food expenditure share, budget allocation, food security of
households in Urban Ethiopia.

Figure 11 – although it is the time when the last season’s harvest comes on to the market,
the price of all varieties of teff spiked and hit a record level in March 2023. Traders are
already reporting that teff is already in short supply in Addis Ababa markets as they are
not receiving from the surplus producing areas9.

Figure 11: Price trend of teff (mixed) in Addis Ababa market

8
https://reliefweb.int/report/ethiopia/ethiopia-comprehensive-food-security-and-vulnerability-analysis-cfsva-
2019
9

https://www.thereporterethiopia.com/31981/#:~:text=Addis%20Ababa%20is%20facing%20a,increase%20from
%20the%20previous%20month.

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 Monthly Market Watch | Ethiopia CO | March 2023 Page 12 of 22

Source: WFP Market Price Monitoring Surveys

Figure 11-Prices of teff upsurged abruptly in late February and March and conspicuous
scarcity of the product due to unexplained reasons. For example, Sergegna teff, the variant
consumed dominantly by the middle-income households, is reported to be selling at 67
percent higher than the prices one year ago and 123 percent above the five-year average
for the month. Apart from Addis Ababa, modest price increase has been observed in the
other parts of the country as well. Over the past decade, the price of teff has been
increasing due to array of factors including but not limited to the production failing to keep
pace with the fast-growing demand, the cost push (due to very high fertilizer and seed
prices and labour costs) and the levels of inflation prevailing in the country. The immediate
reasons cited by politicians and the media as drivers of the observed price hike of the
product are:
• the supply chain disruption by “illegal entities” that set-up checkpoints on the way
to Addis Ababa.
• Farmers are not willing to sell their products at prices set by the Government.
• Some traders are manipulating the price by hoarding a large stock of teff in their
store instead of selling in the market.
• Politically motivated entities are trying to gain political profit by preventing the
entry of Teff in the city.

Figure 12: Trends of teff price in Addis Ababa market

8,000

7,000

6,000

5,000

4,000

3,000
3,732
3,673
3,666

3,554

3,502
3,500

2,000
3,420
3,396
3,220

3,213
3,134
3,117

1,000

-
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Five year average 2022 Year 2023 Year

Source: WFP Market Price Monitoring Surveys

Implication for food security

Analysis using data from two waves of the Ethiopia Socioeconomic Survey suggest that an
increase of 10 percent in teff prices reduces the consumer welfare by 2.46 percent of their
weekly food budgets10. From a food security perspective, the spike in the price of teff will
have detrimental effect on the wellbeing of urban population who rely on teff for their

10
https://onlinelibrary.wiley.com/doi/abs/10.1111/agec.12614

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 Monthly Market Watch | Ethiopia CO | March 2023 Page 13 of 22

consumption. The observed price hike will push the price of injera upwards and
jeopardizes the welfare poor women engaged in the sales of injera. On the other hand, the
price hike may present an opportunity for poor rural households producing teff as it helps
them to earn more income from the sale of the grain, which is often considered as a cash
crop.

4.2 Despite the bumper wheat harvest reported by the Government

serious wheat shortage hits the market

Approximately 10 percent of the dietary energy consumed by Ethiopians is derived from

wheat. Ethiopia is the largest wheat producer in sub-Saharan Africa, but the country had
not been self-sufficient. Compounded with urbanization, lifestyle change, and population
growth, the demand for wheat showed substantial increase in the past decade. To meet
the gap, the government must allocate between 600 million to 1 billion USD to import
wheat for distribution at urban centres at subsidized prices. Since 2019, the GoE has
embarked on an effort to fully substitute wheat imports through the expansion of summer
(irrigated) wheat and rain-fed wheat production throughout the country. The Programme
intends to enhance the production of wheat through the provision of irrigation schemes,
better inputs supply, and mechanized farming in the lowland and central parts of the
country.

Production and Import

Table 1 shows the quantities of wheat and wheat products produced and imported
between 2010 and 2023. For the years until 2020, the data published by FAOSTAT is
presented while the three-year data are based on USDA estimation and the estimation
made by Ministry of Agriculture. The data from these different sources may not be
comparable due to the different methods they followed. Over the period between 2010
and 2020, the quantity of wheat produced increased by 92 percent while the quantity of
import declined by 33 percent. The proportion of wheat needs met by import decreased
from 38 percent in 2010 to 17 percent in 2020. According to the report by African
Development Bank, wheat production from irrigated and rain-fed systems is reported to
have reached 7 million metric tons in 2021/22, which buffered the country from importing
wheat in 202211.

The GoE estimates the 2022 Meher season rain-fed wheat harvest was at around 10.1
million MT. During the same Ethiopian Agricultural Calendar year (October 2022 to
September 2023), the government expects 1.3 million hectares of irrigated wheat to
produce an additional 5.2 million MT for the year. This brings the total estimated quantities
of wheat produced within 2022/23 agricultural calendar year to 15.3 million MT against a
domestic demand of 9.7 million MT as put by MoA. The estimates also put that 3.2 million
MT of wheat could be available for export. The GoE wheat production estimate is nearly
threefold of the estimate by the United States Department of Agriculture (USDA) of 5.7
million MT for the 2022/23 agriculture year. Estimating annual wheat consumption at 7.38
million MT, the USDA projects that 1.4 million MT of wheat imports would be needed to
close the harvest deficit for 2022/23. The official 2022/23 crop production estimate from

11
https://www.afdb.org/en/dakar-2-summit-feed-africa-food-sovereignty-and-resilience/about-dakar-2-
summit/scaling-heat-tolerant-wheat-
ethiopia#:~:text=In%20total%2C%20the%202021%2F22,net%20exporter%20by%202025%2F26.

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 Monthly Market Watch | Ethiopia CO | March 2023 Page 14 of 22

Ethiopian Statistics Service (ESS) is not yet out, and it is difficult to reconcile the divergent
wheat production estimates by GoE and USDA.

Table 1: Quantities of wheat production and import (‘000 MT)-Ethiopia

Production Import ('000 Percentage met

Year ('000 MT) MT) through import Data Source
2010 2,856 1,715 38% FAOSTAT
2011 2,916 1,734 37% FAOSTAT
2012 3,435 1,018 22% FAOSTAT
2013 3,925 867 18% FAOSTAT
2014 4,232 1,122 21% FAOSTAT
2015 4,651 1,373 23% FAOSTAT
2016 4,538 2,576 36% FAOSTAT
2017 4,643 1,178 20% FAOSTAT
2018 4,838 1,316 21% FAOSTAT
2019 5,315 1,472 22% FAOSTAT
2020 5,479 1,141 17% FAOSTAT
2020/21 5,200 1,503 22% USDA
2021/22 5,520 1,550 22% USDA
2022/23 5,700 1,400 20% USDA estimation
2022/23 15,300 NA Surplus for export? MoA estimation

Interference of the Government in the wheat market

According to report published local media sources12, the Oromia region distributed
quotas to wheat-growing zones, while the zones distributed to districts to help the region
collect the quota allocated by the Federal Government. The agricultural leaders of each
district and the representatives of farmers consulted with the farmers in each kebele. The
farmers are not complaining about providing the wheat to the government, but they are
repeatedly complaining about the price set for each MT of wheat. Each farmer has been
ordered to sell one MT of wheat to traders for 32,000 birr. The government has set a price
for traders to supply the same MT of wheat to the unions for 33,300 birr. The process of
offering it to the foreign market and setting the price comes after this process.

Farmers who said that it is not profitable to sell the produce at the price set by the
government, chose to hide the produce. According to the procedure set by the
government, wheat will be confiscated if a vehicle is found driving it on the road. This has
led to the spread of illegal wheat smuggling. Traders are not selling the wheat according
to the guidelines set by the government and they pay illegal fees to pass the check points.
Therefore, the traders who paid extra price for the farmers and checkpoint sell the grains
at higher price. There are complaints reported by flour factories that wheat coming from
Oromiya seems blocked and they are not able to get the grain in Addis Ababa market for
the last two months. This may imply the GoE is intervening to control the market which
creates inefficiency in the market. In response, bakeries have to transfer the price to the
final consumers.

12 https://wazemaradio.com/%e1%8b%a8%e1%8a%a6%e1%88%ae%e1%88%9d%e1%8b%ab-%e1%8a%ad%e1%88%8d%e1%88%8d-
%e1%88%88%e1%8b%8d%e1%8c%aa-%e1%8c%88%e1%89%a0%e1%8b%ab-%e1%8b%a8%e1%88%9a%e1%8b%ab%e1%89%80%e1%88%ad%e1%89%a0%e1%8b%8d/

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 Monthly Market Watch | Ethiopia CO | March 2023 Page 15 of 22

Price trends

Figure 13: Nominal price trend of wheat grain in Addis Ababa market (Birr/kg)
70.00

60.00

50.00

40.00

30.00

20.00

10.00

0.00

Jul-20
Apr-17
Jul-17

Jul-18

Jul-19

Jul-21

Jul-22
Apr-18

Apr-19

Apr-20

Apr-21

Apr-22
Jan-17

Jan-18

Jan-19

Jan-20

Jan-21

Jan-22

Jan-23
Oct-17

Oct-18

Oct-19

Oct-20

Oct-21

Oct-22
Source: ESS

Wheat export

Against the backdrop that imposed an export ban on cereals since 2008, the GoE
announced that it will export surplus wheat in 2022/23 agriculture calendar year.
Out of the total of 15.3 million MT of wheat predicted to be available from domestic
production in the agricultural year, the GoE planned to export 3.2 million MT to the foreign
market. The government is now expected to step up its export bid and has already secured
contracts with some countries that showed interest to buy Ethiopian wheat. In preparation
to this, the Ethiopian Commodity Exchange (ECX) has announced that it has started the
trading of wheat on its floor.

4.3 Government measures to address the shortage of teff and wheat

• The city government has allocated 1 billion Birr as revolving fund for Unions
supplying grains to the city market. The Consumers’ Cooperatives are intended to
provide the commodities at lower prices to the community. The city
administration announced that it will set up a task force in charge of coordinating,
bringing and distribution of consumers’ goods in the city.
• Oromiya Regional state has announced that it has lifted the price cap imposed on
wheat at 3200 Birr per quintal.13. Hence, farmers are allowed to sell to anyone at
the market price and no longer restricted to sell only to Unions.
• Addis Ababa city council has approved additional 54 million Birr for the
government school feeding programme that is providing fresh meal to 300,000
elementary and junior secondary school students in the city. The budget increase
was made in response to the frustration of mothers providing the meal over the
raising prices of basic commodities used for food preparations. The additional

13
https://www.capitalethiopia.com/2023/03/20/oromia-region-lifts-wheat-price-cap/

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 Monthly Market Watch | Ethiopia CO | March 2023 Page 16 of 22

budget approval will increase the per student daily spending from 20 Birr to 23
Birr14.

5. Market dynamics in
Conflict-affected areas of
Tigray
5.1 Staple cereals
Figure 14 –with the conflict underway, the first eight months of 2022 saw steep and
extraordinary staple cereals price increases in Mekelle market. Particularly, the prices of
staple foods like teff (172 percent), maize (218 percent), sorghum (281 percent), and wheat
grain (219 percent) registered magnificent year on year increases. The price increases were
well above the increases experienced elsewhere in the country during the same period.
Despite inflation being a phenomenon all over Ethiopia, the price increase in Tigray were
relatively higher compared to those in the other parts of the country.

The upward pressure in the prices of staple cereals started to seasonally decline in
September 2022. Between August and November, the prices of maize, teff, and barley
dropped by 31 percent, 39 percent, and 25 percent, respectively (Figure 14). A large portion
of the price decreases occurred in November, most likely responding to the signing of the
peace agreement and the concomitant opening of the supply routes from Central Ethiopia.

Figure 14: Trends of average prices of key staples in Mekelle markets

140.0

120.0

100.0

80.0
Peace Agreement

60.0

40.0

20.0

0.0
Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22 Jul-22 Aug-22 Sep-22 Oct-22 Nov-22 Dec-22 Jan-23 Feb-23
Teff_mixed (ETB/Kg) Sorghum white Maize (ETB/kg) wheat grain (ETB/Kg)

Source: WFP market survey

14
https://ethiopianmonitor.com/2023/03/09/city-renews-ban-on-housing-rent-hike-evictions/

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Monthly Market Watch | Ethiopia CO | March 2023 Page 17 of 22

5.2 Wage to cereals terms of trade (ToT):

The war in Tigray induced economic slump for households engaged in the wage labour as
wage labour opportunities plummeted in the region. Figure 15 - the ToT for wage to
cereals deteriorated and hit rock-bottom in August 2022 primarily due to the declining
wage rate accompanied with the skyrocketing cereal prices. For instance, a daily labourer
could generate an income that is able to fetch 5.8 kg of wheat in January 2022 could only
buy 1.4 kg of wheat in August 2022. The ToT exhibited upward tendency in the ensuing
months and a daily labourers could buy 4.6 kg of maize or 3.1 kg wheat grain or 3.3 kg of
sorghum using one day wage in February 2023. However, the purchasing power of daily
labourers in February 2023 is standing far below the situation at the beginning of 2022,
suggesting that the welfare of daily wage labourers has deteriorated over the past one
year.

Figure 15: Terms of Trade (ToT): Wage to sorghum in Tigray markets

7.00

Peace Agreement
6.00

5.00

4.00

3.00

2.00

1.00

0.00

Wage to Sorghum Wage to Wheat Wage to maize

Source: WFP market survey

5.3 Fuel
After the war erupted in Tigray in November 2020, most of the fuel stations stopped
operating as they could not access supplies from the Ethiopian Petroleum Supply
Enterprise, the sole importer and distributor of refined petroleum products in Ethiopia.
Informal fuel traders, whose source of fuel remain elusive, proliferated throughout the
region but supplies remained tight. They sold benzene and diesel at elevated and highly
volatile prices. As shown in Figure 16, in Mekelle, the price of benzene peaked at 559
Birr/litre in March 2022, around 18-times the pump prices in Addis Ababa at the same time.
The peak price for diesel was in April 2022, when informal traders were selling a litre of
diesel at 474 Birr. After the signing of the peace deal, the availability and price of fuel
showed massive improvement. The price of benzene and diesel nosedived and hit its
lowest point in two years in February 2023 at 67 Birr/litre.

Figure 16: Fuel Price trend in Mekelle market

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Monthly Market Watch | Ethiopia CO | March 2023 Page 18 of 22

600

500

400

300

Peace Agreement
200

100

Benzene (ETB/L) Diesel (ETB/L)

Source: WFP market survey

5.5 Comparison of prices in Conflict affected areas

Table 2 compares prices of key food commodities in conflict-affected areas of Amhara

(Debark and Sekota woredas) and Tigray (Adigrat, Mekelle and Shire) to that of Dessie
market, a source market for eastern Amhara, Afar and for Tigray as well before the conflict.
Prices in conflict-affected areas that are 20 percent higher than Dessie market prices are
marked by red icons, those between -20 to 20 percent relative to Dessie prices are marked
by yellow in, and those below -20 percent of Dessie prices are marked by green icons. The
prices of most commodities in Debark market are comparable to that of Dessie market.
Sekota market has significantly higher price of sorghum and rice as compared to that of
the reference market. Adigrat and Mekelle have relatively higher prices of wheat, sorghum,
and rice than the Dessie market.

Table 2: Comparison of prices in Conflict affected areas

Amhara Tigray
Dessie Debark Sekota Adigrat Shire Mekelle
Commodity Unit Birr Birr/ Unit % of Dessie Birr/ Unit % of Dessie Birr/ Unit % of Dessie Birr/ Unit % of Dessie Birr/ Unit % of Dessie
Ma i ze whi te kg 34 33 -2% 33 -4% 35 4% 42 25% 41.0 21%
Whea t whi te kg 47 51 9% 43 -8% 56 21% 37 -20% 60.6 30%

Sorghum whi te kg 38 40 5% 60 58% 71 86% 43 14% 58.3 53%

Teff Mi xed kg 63 63 0% 60 -5% 69 9% 81 28% 68.3 8%
Whea t Fl our kg 72 70 -3% 50 -30% 68 -6% 64 -11% 71 -1%
Ri ce kg 60 65 9% 77 29% 78 30% 102 71% 76 27%
Edi bl e Oi l Liter 195 150 -23% 190 -3% 217 11% 202 4% 205 5%
Goa t (Loca l ) head 9,580 4,060 -58% 5,120 -47% 5,380 -44% 2,893 -70% 5481 -43%
Sheep (Loca l ) Head 5,750 4,300 -25% 4,460 -22% 4,005 -30% 3,198 -44% 6544 14%

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 Monthly Market Watch | Ethiopia CO | March 2023 Page 19 of 22

6. Terms of Trade (ToT): Shoat

to Coarse cereals and Shoat to
Refined cereals
Most of the Somali population pursue pastoralism as their main source of livelihood.
Mobile livestock rearing makes efficient use of the region’s abundant land and volatile
climate by using predominantly seasonal migration to move herds to where water and feed
resources are more abundant15. In exchange for exporting livestock, pastoralists bring
cereals, such as maize and sorghum from Central highlands and wheat flour, rice, pasta,
and other cereals through Somaliland/ Somalia. For these reasons, the terms of trade
between livestock and coarse cereals and livestock to refined cereals are often taken as an
indicator of pastoralist welfare. Although this terms-of-trade indicator is not
comprehensive enough from a welfare standpoint, it is nevertheless indicative of how
livestock’s comparative advantage can vary over time based on national and international
price movements.

Figure 17 illustrates the nominal price trends of important cereals and average sized shoat
in Jijiga market between 2018 and February 2023. Almost all cereals exhibited steep price
increase in May 2021 and the stead and strong upward movement continued unabated,
echoing the rise in the parallel market exchange rate of Birr against US dollar. Over the
past one year, the prices of maize and sorghum rose by 43 and 67 percent, respectively.
Rice and wheat flour increased by 59 percent and 58 percent increase during the same
period. On the other hand, average sized shoat is being sold at 33 percent higher price,
which is far below the price increase of cereals.

Figure 17: Price trend of cereals and shoat in Jijiga market

8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
-
Jul-18

Jul-19

Jul-20

Jul-21

Jul-22
Apr-18

Apr-19

Apr-20

Apr-21

Apr-22
Jan-18

Jan-19

Jan-20

Jan-21

Jan-22

Jan-23
Oct-18

Oct-19

Oct-20

Oct-21

Oct-22

Maize (100 kg) Rice (100 kg) Sorghum: (100 kg)

Wheat flour (100 kg) Shoat : Local (head)

Source: WFP Market Price Monitoring Surveys

15
https://www.researchgate.net/publication/254416846_Enhancing_resilience_in_the_Horn_of_Africa_An_ex
ploration_into_alternative_investment_options/figures?lo=1

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 Monthly Market Watch | Ethiopia CO | March 2023 Page 20 of 22

Shoat to coarse cereals: Figures 18 and 19 depict the trends of shoat to maize and shoat
to sorghum ToT in six Somali region markets over the three-year period between January
2020 and February 2023. Despite episodic improvements during the Gu rainy seasons
(April to June), the overall situation of ToT has been unfavourable for pastoralists over the
past three years. The failed five successive rainy seasons in Somali region resulted in
livestock poor body conditions that led to a decrease in their demand and price. This
compromised most pastoralists’ abilities to raise incomes to provide for their families. An
average-sized male sheep/goat that could fetch 150 kg of maize in February 2021 in Gode
market now brings only 68 kg in February 2023, a decrease of 55 percent over two years
period. In Gode market the ToT has deteriorated from 122 Kg to 67 Kg of sorghum during
the same period.

Figure 18: ToT shoat to maize Figure 19: ToT Shoat to Sorghum

2.00 2.10
1.80 1.90
1.60 1.70
1.40 1.50
1.20 1.30
1.00 1.10
0.80 0.90
0.60 0.70
0.40 0.50
Jul-20

Jul-21

Jul-22
Apr-21
Apr-20

Apr-22
Jan-20

Jan-21

Jan-22

Jan-23
Oct-20

Oct-21

Oct-22

0.30
Jul-20

Jul-21

Jul-22
Apr-20

Apr-21

Apr-22
Jan-20

Jan-21

Jan-22

Jan-23
Oct-20

Oct-21

Oct-22
Afder (Chereti) Degehabour (Jarar)
Afder (Chereti) Degehabour (Jarar)
Gode (Shebelle) Jijiga (Fefan)
Gode (Shebelle) Jijiga (Fefan)
Kebridehar (Korahe) Shinille (Sitti)
Kebridehar (Korahe) Shinille (Sitti)

Source: WFP Market Price Monitoring Surveys

Shoat to refined cereals: refined cereals such as pasta, wheat flour, rice, etc. constitute
around 31 percent of the dietary energy consumption in Somali region. Refined cereals are
imported to Somali region mostly through informal routes. Figure 20 and 21 depict the
ToT of shoat to rice and shoat to wheat flour, which indicates how much rice and wheat
flour a pastoralist can buy after selling an average sized goat/sheep. The overall trend show
that the ToT has been deteriorating over the past two years, due to the combined effect of
the devaluation of Birr particularly in the parallel market and the drought that has hit the
region. An average-sized male sheep/goat that could fetch 55 kg of wheat flour in February
2022 in Fik (Ngob) market now brings only 45 kg of wheat flour in February 2023, a decrease
by 18 percent. In Jijiga market, the ToT has deteriorated from 68 Kg to 57 Kg of rice during
the same period. Under such circumstances, poor households are forced to buy
significantly less quantities of food compared to the quantities they purchased one year
ago, or they are forced to switch to less preferred and cheaper substitute food items to
cope with the price hikes.

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 Monthly Market Watch | Ethiopia CO | March 2023 Page 21 of 22

Figure 20: ToT -Shoat to rice Figure 21: ToT - Shoat to wheat flour
1.20
1.10
1.40
1.00
1.20
0.90
0.80 1.00
0.70
0.80
0.60
0.50 0.60

0.40 0.40
0.30
Jul-22 0.20
Jul-20

Jul-21
Apr-20

Apr-21

Apr-22
Jan-20

Jan-21

Jan-22

Jan-23
Oct-20

Oct-21

Oct-22

Jul-20

Jul-21

Jul-22
Apr-20

Jan-21
Apr-21

Apr-22
Jan-20

Jan-22

Jan-23
Oct-20

Oct-21

Oct-22
Afder (Chereti) Degehabour (Jarar)
Afder (Chereti) Degehabour (Jarar)
Gode (Shebelle) Jijiga (Fefan)
Gode (Shebelle) Jijiga (Fefan)
Kebridehar (Korahe) Shinille (Sitti)

Source: WFP Market Price Monitoring Surveys

7. Markets & Food

Security Outlook
• There are no signs indicating that the underlying inflationary pressure on food
prices will be abated soon. Prices of locally produced grains are expected to rise
further in the coming months due to the lean season. This is expected to continue
to jeopardize the food security status of poor households that rely on markets to
access food. The reinstatement of vetting on the sources of forex for the franco
valuta-based importing may depress the availability and consequently the prices
of imported essential food items such as edible oil in the market.
• With the lifting of the price cap and removal of checkpoints in Oromiya and other
regions where there were restrictions on supplies of wheat and teff on the market,
the prices of these commodities could decrease in the coming months. However,
the aversive experience of wheat growing farmers due to price cap imposed by the
GoE may create a disincentive for wheat production in the coming harvest seasons.
• A significant proportion of urban residents and pastoralists in Somali region rely
on imported items like pasta, rice, wheat flour as their staple cereals which are
imported mainly through informal routes. The depreciation of the currency against

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 Monthly Market Watch | Ethiopia CO | March 2023 Page 22 of 22

US Dollar in the parallel market means importing these items is becoming more
expensive. When importers procure foreign exchange at the unofficial instead of
the official rates, domestic food price inflation reflects changes in the cost of food
imports according to the parallel-market rates.
• The Council of Ministers has approved to enforce mandatory fortification of wheat
flour and edible oil. The Food, Beverage, and Pharmaceutical Industry
Development Institute announced that wheat flour fortification with selected
vitamins and minerals should be made mandatory as of June 2023. Accordingly,
wheat flour is required to contain vitamins B1, 2, 3, 6, 9, folic acid, and zinc while
edible oil will have to be fortified with Vitamin A and D. Producers and importers
have been warned to make the necessary infrastructure as unfortified wheat flour
cannot be produced or marketed16. As a result, the prices of wheat flour and edible
oil may show slight increase in the coming months as the additional cost related to
fortification is transferred onto consumers.17
• The downward trend of food prices in the Tigray market along with slowly
improving livelihood opportunities are contributing to improving households’
access to food. However, the levels of food insecurity in the region is likely to
remain high in the short to medium term.

For more information about this bulletin, contact VAM Unit:

[email protected] , [email protected] or [email protected]

DIVISION NAME: VAM Food Security Analysis
World Food Programme, Ethiopa
Kirkos Sub City, Kebele 17/18, River Side Hotel PLC Addis Ababa, Ethiopia | T
+251 115 172 121 F +251 115 514 433

16
https://www.ethiopianreporter.com/116007/
17
https://www.thereporterethiopia.com/25738/

WFP VAM | Food Security Analysis