Behind Ethiopia's booming economy lies the untold story of rising costs and shrinking wallets.
. . .
For an outsider, Ethiopia seems to be having a blast with its economy. Growing at an impressive 6.2%, it's one of the fastest-growing economies in Africa. But if you ask the average Ethiopian how the economy is treating them, they might just laugh in your face and not the joyous, "life is good" kind of laugh. More like the "this is the worst joke I've ever heard" kind of laugh.
Despite this so-called "exponential growth," Ethiopia is still one of the poorest countries in terms of per capita income. So while the economy might be growing like a teenager on steroids it doesn’t seem to be “working out” for the citizens(no pun intended). People are left wondering why life is getting harder by the day. It does not take a PhD in economics to know it’s because everything is getting more expensive. Addis Ababa, the capital, is now the second most expensive city in Africa.
To demonstrate, let’s compare the living costs of Addis with that of Nairobi. Rent for a one-bedroom apartment in the city center is 46% higher in Ethiopia. And basic utilities? A mind-blowing 464.9% more expensive. Although Addis Ababa residents pay less for certain services like transportation and telephone bills, they face a cost of living that is 57.8% higher than that of Nairobi, despite earning only half of the average income of Nairobians.
So while the world is fascinated at Ethiopia’s economic progress, the average Ethiopian is left scratching their head, wondering where all this "growth" is hiding. Because it’s certainly not in their wallets. In a country where the gap between the rich and poor is growing wider by the day, the middle ground has all but vanished, leaving only the super-rich and the struggling masses.
Who’s to Blame?
When crises like these happen, we all look for someone to heap all of the blame on. Unfortunately, there’s no single body responsible for all of Ethiopia’s economic woes. One of Ethiopia's key vulnerabilities is its status as a net food importer, meaning domestic agricultural production is insufficient to feed the population, forcing Ethiopia to import additional food products. Since the COVID-19 pandemic, global supply chain disruptions have driven up the cost of these imports. Internal conflicts have further strained supply chains. In 2022, Ethiopia's wheat imports from Ukraine and Russia—two of its primary suppliers—were severely impacted by the ongoing war, leading to reduced availability and increased prices. Coupled with rising global fuel prices (another crucial Ethiopian import), price-gouging merchants, and a shortage of foreign currency, it is clear that Ethiopia is facing a perfect storm of economic challenges.
It's also important to note that inflation is not a uniquely Ethiopian problem. While our neighbors in Kenya are faring better, they too are dissatisfied, as evidenced by recent demonstrations on the streets of Nairobi. And life in Kenya certainly isn't better just because they have cheaper beef. There are many things that impact whether a place is livable or not.
Regardless, inflation has caused major global distress, receding hairlines, and skyrocketing blood pressure which are enough to keep cardiologists busy for years. But the impact goes beyond the physical. In our podcast with Dr. Seble Hailu, a mental health professional, she pointed out that inflation isn’t just bad for your wallet; it’s bad for your mind too. Rising costs and unemployment have a way of triggering that special kind of existential dread, the kind that makes you stare into your coffee and wonder if you can afford another cup.
Is There an End in Sight?
There may be hope, but it requires a keen eye to see it. Efforts are underway to stabilize the Ethiopian economy, including the recent decision to open the retail and wholesale markets to foreign competition, which could potentially lower consumer prices. However, for Ethiopia to truly prosper, more comprehensive and inclusive strategies are needed. Opening the market is a positive step, but it's not a panacea. The government must also focus on investing in domestic agriculture, stabilizing the local currency, and ensuring that economic growth benefits all citizens, not just the wealthy elite. Until then, all we can say is hang in there! This is a pat on the shoulders of our fellow Ethiopians.
The data used in this article is sourced from Numbeo.com. Prices fluctuate frequently, and so do the corresponding figures.
