There is no government as lucky as the Ethiopian, so to speak. While as many as 35 governments across the world - from Haiti to Egypt and Bangladesh, as well as Somalia’s feeble transitional government - have become targets of their citizens’ rage due to surges in food prices, no one has resorted to the streets, of Addis Abeba so far, in an attempt to vent their frustrations out in public. Such action would inevitably lead to a confrontation with the uncompromising Federal Police.

This, however, does not mean that the problem of escalating food prices is insignificant in Ethiopia; in fact, it is a burning issue, particularly in urban centres across the country, scorching hundreds of thousands of people in the fixed income basket.

But consumer depression due to runaway inflation is not limited to people in this group. It is now knocking on the doors of those from middle and upper middle class, who surely felt the punch when headline inflation hit a record high of 29.6pc in July 2008, moving by an annual average of 18.4pc in the past 12 months. When it comes to the prices of food, it is even worse; inflation peaked to 41.3pc in July 2008, with a 12-month moving average of 23.6pc. Compared to prices of food recorded in July 2007, last month’s increase represents a staggering 64.2pc, according to the latest Consumer Price Index (CPI), released this month by the Ethiopians Statistics Agency (ESA).

This alarming development is of grave concern not only to the Ethiopian government, but to nations far and wide. The year 2007 witnessed a 60pc global increase in food prices estimated to have absorbed 100 million people into the poverty trap worldwide.

UN Secretary-General Ban Ki-moon described the crisis as “a multidimensional problem affecting economic growth, social progress and even political security”.

History reverberates Mr. Ban Ki-moon.

Food shortages and hyperinflation have had dire consequences in some nations. They have been known to trigger political turmoil, as happened in France, prompting its revolution, and Egypt in the 1970s. Haiti’s government collapsed this year, deservedly attributed to popular protest provoked by the escalating price of rice.

Although late, policymakers in Ethiopia have come to recognize the degree of the crisis that has been swelling right under their nose since December 2005. Despite impressive gains in the expansion of Ethiopia’s economy over the past five years - hailed by the government as the first in its economic history - and massive public infrastructural works, this is an economy besieged today by obliterating inflation, a terrifyingly dwindled foreign currency account balance (enough for less than 1.5 months’ import) and an unhealthy trade deficit creeping close to five billion dollars.

Those in defence of the government would argue that these are unpleasant consequences of growth. It could probably be the case.

However, the problem is partly due to the government’s own making, while part of it obviously goes beyond its control. That the price of oil on the international market sky rocketed from an average of 18 dollars a barrel to 145 dollars is not within the bounds of the government. Nevertheless, the country’s oil bill has begun to claim over 90pc of what it generates largely from exporting its primary goods.

The response for an onslaught-inflation should be more and speedy growth, and this is where the government could be apportioned blame. For an administration which struggles to anchor its legitimacy on its achievements on the economic front, in more so than it could have from other areas, such line of argument is expected, although not convincing.

Interestingly, this justifies an unconstrained appetite by the state to keep pouring billions of dollars into public investments, hoping that it is possible to have a desirable high economic growth to combat a double digit inflation rate, the latter is by no means a welcome phenomenon.

This is a high risk approach, deeply rooted in the thinking that the end justifies the means. It probably does not because the size of the population that could be crushed by the current in the meantime should be a source of worry.

Like many governments across the world who made a U-turn on their long held policies, so was this administration forced to do exactly what the Prime Minister argued was wrong when an MP, Bulcha Demeska (OFDM), suggested the move a few months earlier. Bulcha was at a loss as to why it would be as complex as rocket science for the government to buy grain from aboard for sale in the local market.

In spite of his earlier rebuttal, Prime Minister Meles Zenawi’s views have had a turnaround now. The government is compelled to spend tens of millions of hard earned foreign currency to buy wheat for local distribution. It is part of a series of measures Meles’s administration is taking, in response to inflation, a phenomenon he declared as “public enemy number one” in Parliament before it went to recess. 

Depressingly, inflation in Ethiopia is out of control, it seems; people’s expectation that prices are bound to increase further has itself fuelled inflation.

Aside from what this administration is doing and fails to do on the monetary and fiscal policy fronts, a relief measure the Prime Minister promised Parliament was the importation of 150,000tn of wheat from aboard, an amount representing a little over 30pc of the total wheat the country produced in 2005/06. The government has already spent 65 million dollars, procuring the grain from Agrimpex Co. Ltd, a Swiss based trading company.

The first batches of this import have arrived, to be distributed to the public in a heavily subsidized manner, almost at half the international price of the grain. Residents in 12 towns, but majority of them in the capital, are the targeted beneficiaries, provided that the distribution channel is efficient and transparent, as free as possible from corruption and nepotism. There is little evidence from past records to believe this will be the case.

The administration hopes to achieve two main policy objectives in this seemingly expensive venture: dampening prices and providing welfare to people from the lower income group.

In Addis Abeba alone, there are an unidentified number of people who cannot afford to pay what the market is asking. This ought not to be surprising because no one seems to have the data on the exact number of the capital’s population, although hardly anyone buys the official statistics provided placing it at 3.7 million residents. This makes it very difficult to project the success of heavily subsidising the grain, whose distribution began last week.

But this is secondary compared to what the latest distribution could do to the market. By importing large volumes of grain from aboard, and promising to import a series of other shipments, the government is gambling to tackle inflationary expectation, if not sending a clear message to wholesalers who might have hoarded wheat in their stores.

This is indeed a wise move. If successful, the administration hopes it would do two things: assure the public that there is enough supply in the market, thus there is no need to rush into a shopping spree, the less people buy at this moment, the more prices will stabilise; it could also awash the market with supply, hopefully resulting in the decline in prices, a process that could last long enough for the next harvest to arrive.

But these are measures that are temporary in their very nature. They are like ways deigned to give the administration breathing space. A government of a poor country with a small budget and a potentially growing budget deficit cannot simply afford to keep subsidising grain for eternity. As it is, its old habit of subsidising fuel at gas pump level is costing the economy dearly.

Global inflation on food, oil and commodities is due to growing demand; there is no reason to believe that these demands, particularly from China and India, will subside anytime soon. Many countries have already banned exports of grain, as is the case with India.

The government should look into other long term and innovative approaches that may involve a policy shift and administering bitter pills. This may serve as an opportunity to encourage the government to consider letting the private sector start to develop large scale commercial farming in food producing areas that may even be very populated.

However, some measure of fiscal tightening, in order to cool off an economy that is heating, may just well be an idea worth pondering on. It appears that the time for monetary policy response has long gone, with the country’s monetary authorities failing to move as quickly in adjusting interest rates as they needed to.