If we can't feed our people, then how come we are maintaining a military presence in Somalia, which is much more costly?
Bulcha Demekesa, Chairman of (OFDM),

Bulcha Demekesa, Chairman of the Oromo Federalist Democratic Movement (OFDM), speaks about the inflation rising sky high currently. He also speaks about his reaction to Prime Minister Meles Zenawi's biannual report to parliament last week.

Bulcha argues that the measures being taken by the government to contain inflation are simply not right. Bulcha, who was once chairman of the Awash International Bank and chief or Budget at the Ministry of Finance during Emperor Haile Sellassie's time, says that there are other remedial measures that can be taken.

Bruck Shewareged caught up with Bulcha Demeksa and interviewed him on inflation and related issues. Excerpts:

What was your relation to the PM's report?

The PM decided to limit what he wanted to discuss to inflation beforehand. Most of us (MPs) expected him to include several other issues in his bi-annual report.

Apart from inflation, he should have discussed unemployment. It is not only because of price hike that people go to bed on empty stomachs, but also because they are unemployed. We also expected to hear something about Somalia. Every day we hear and read reports on international media that Ethiopians in Somalia are dying.

The Prime Minister should have addressed the Eritrean issue, too. We also heard on the international media that Ethiopia has contributed five helicopters to the peacekeeping mission in Darfur, Sudan. We are not saying this is wrong. But as representatives of the Ethiopian people, we should have heard about it.

There is another hot issue that we hoped that the PM would raise. We hear that people and cattle are dying of starvation in Borena and Guji zones in Southern Ethiopia. Nothing was said about it. The PM talked only about inflation.

Do you feel that the prime minister's report about inflation is comprehensive enough?

It was not comprehensive enough. I'm not saying this just because I'm from an opposition party. For instance, the PM should have extensively dealt with the supply side of the problem. Why did this inflation occur? Is it because of a sudden rise in demand? These things should be elaborated.

Elementary economics has it that when supply decreases, prices go up. It is simple. But why did supply decrease? Is it because farmers refused to sell their produce? Or are traders hoarding? What is the real case for this price hike?. The prime minister did not elaborate on this problem.

He tried to tell us that traders are hoarding essential goods. But any reasonable person would ask, "Why do traders, all of a sudden, begin to hoard items?"

The PM threatened to go after these "hoarders," and force them to post price list in front of their shops. But the public had been told that Ethiopia follows the free market economy. Such kind of price controls won't do. Normally businessmen sell and consumers buy. Unless there is a problem, they want to sell. But now, there is a problem. The mechanism is not working.

But businessmen maintain that they always want to sell, not hoard?

There are always acts of hoarding. Whenever traders anticipate a problem, they stockpile goods rather than sell them. Say, if war is about to come, or meteorological reports suggest that there is going to be drought, some traders tend to refrain from selling, biding their time. They would sell it later at inflated price. We know such practices. But why would they do it now? What are they expecting? Is it the possibility of war or drought? Or could it be that donors are going to stop giving food aid to Ethiopia?

Forcing a business person to sell items at lower prices, compelling him to sell now, not later, and arresting him and later releasing him because someone intervened on his behalf, amounts to, as an MP put it, a breakdown in law and order.

Farmers also cannot be forced to sell their produce right now. They would ask, otherwise, "Why should we till the land then?" Traders could also quit the business because it is not a reliable one. Such attempts, which by nature belong to command economy, are likely to fail.

Ethiopia once dabbled in socialism. It didn't work. Sudan, Egypt, Tanzania, Benin, Somalia and many other countries tried the command economy once, and they all failed. That's why they abandoned price control.

The government is expected to take some measures in order to control inflation. You may not agree with the specific measures. But, in your opinion, what should the government do?

The prime minister tried to relate the inflation here to a global phenomenon, i.e. the inflation in global market. He explained that the biggest market with 1.6 billion people, i.e. China and the Indian market with one billion people, are importing wheat and other food items which drove prices up globally.

However, we are not seriously related to that market. Our staple food is teff. Teff is consumed in Ethiopia. Maybe in some places in Kenya and Djibouti, and in Eritrea, it is consumed. But Ethiopia is the main consumer. We don't export it. So there is no way that shortage of supply in the local market could occur as a result of massive export of teff. So it is not right to relate our problem to the global phenomenon.

But why are food prices going up?

Any economist will attribute the problem to shortage of supply. There is not enough production of teff, maize, peas and lentils. Population increase, coupled with production decrease, causes the price hike.

But sometime back the government was saying that grain production had significantly increased?

Well, right now grain production has decreased. And at the same time the population has increased. Why has production decreased? One reason is the unhealthy relationship between government and farmers. The land-holding system must be addressed. Land is owned by government. As long as farmers do not have a guarantee to work on their land, they lack the will to produce more. They should own the land or they should have guarantees that until certain time, that land will not be taken away from them.

In our country, a member of EPRDF (the ruling party), without any doubt, will get the best plot of land. Non-members won't get a good spot. We know that. So ownership assurance must be given to farmers that their plots of land will not be taken away from them and given to EPRDF members.

The other factor which contributes to the price hike is population increase. Despite the fact that HIV/AIDS is killing a lot of people, the population is significantly increasing. There is no family planning scheme.

What do you feel when you walk on the streets of Addis Ababa? We have never seen so many people on the streets of Addis. This, you can see, even without being provided with the statistics. This is a problem.

Even if farmers are producing the same amount of grain as before, there will be a problem as long as the number of consumers is on the rise. We need much more production. Farmers need incentives such as fertilizers, on a long-term loan basis. Roads should be constructed in rural areas. Perishable products like tomato and other vegetables will be wasted due to lack of access to road.

So, to wrap things up, prices have gone up because supply has decreased. It is that simple. It is not because the Indians and the Chinese are buying teff from Ethiopia. Maybe, the supply of spices, onions, chilies etc could decrease because recently they are being exported to neighboring countries.

But still, what should be done to ease the burden on consumers?

Flooding the market with grain, especially wheat, is one possibility. Where can you get wheat in such amount? You can borrow from World Food Programme (WFP) reserves. Government can also borrow from the national reserve. It can buy from farmers, bring it to urban centers quickly and sell it to big traders. Government should not go into retail business. You can make a deal with these traders to sell the wheat at reduced prices in return for such a big supply by the government. You don't need to charge these traders for "artificially inflating" prices. It is better to force them to reduce their prices by flooding the market. You may not afford to take such measure for long. But you can do it for a year or two. Of course, the government might lose some money in the process. But so be it.

The Prime Minister said that doing this is so much costly. But isn't feeding your people a priority?  If we can't feed our people, then how come we are maintaining a military presence in Somalia, which is much more costly?