Rising Costs and Festive Spirits: The Impact of Ethiopia’s New FX Regime

The Ethiopian New Year is a time for family gatherings, new clothes, and fresh starts. Yet this year, the festive mood is marred by financial stress. As families shop for the holiday, they are finding that their birr doesn’t stretch as far, making essentials like food and gifts more expensive. The new market-based foreign exchange system, intended to stabilize the economy, seems to have made basics like meat and spices feel like luxuries. With frustration and concern in the air, Addis Insight went into the heart of the market to find out if the festive spirit can still sparkle despite the mounting costs.

The holiday season in Ethiopia is usually filled with lively music, the aroma of fresh spices, and family gatherings. However, this year feels different. With the new market-based exchange system, prices for essentials like oil, eggs, meat, and spices have surged. What used to be a joyous time now comes with a heavier price tag, making people think twice about every purchase.

As one wanders through the markets, something feels different. Vendors who once greeted customers with warm smiles and playful banter now exchange worried looks as they tally up bills. The usual cheerful chatter has given way to anxious conversations about rising prices and tighter budgets. Shoppers who used to breeze through the stalls now move more deliberately, weighing each purchase carefully. Every extra birr feels burdensome, and the holiday spirit seems to be dimmed by financial strain.

An off-the-record trader reflected on the current economic climate, describing it as particularly challenging. He noted that this year’s holiday season feels more burdensome than previous ones, such as Eid and Easter, emphasizing the growing difficulties faced by traders and consumers alike. He highlighted significant price increases affecting both vendors and consumers. For instance, the cost of a 5-liter bottle of oil has risen from ETB 950 during the previous holiday season to ETB 1,040 now. Similarly, the price of lentils has jumped from ETB 160 to ETB 200, and eggs have increased from ETB 11 to ETB 13. These rising costs illustrate the economic pressures that are making this holiday season particularly challenging.

Another retailer shared a similar perspective, pointing out that the prices of essential goods have increased significantly compared to past holidays. “I don’t remember the exact figures, but we used to sell onions for ETB 80, and now they’re priced at ETB 120,” he said. He attributed the price hikes not only to the usual rise in demand during the holiday season but also to broader economic changes, including the shift to a market-based foreign exchange regime, which has had both direct and indirect impacts on costs. Moreover, he highlighted that the ongoing civil conflicts in various regions of Ethiopia are affecting supply chains and limiting the ability to move and conduct business freely.

The Ethiopian New Year is unique among holidays. It’s a time when many people refresh their homes, swapping out old utilities and accessories for something new, while children don brand-new clothes to welcome a fresh start. However, will the shift to a market-based foreign exchange regime cast a shadow over this tradition? With the potential rise in the cost of imported goods, people might have to rethink their spending, prioritizing essentials as the holiday approaches.

Ayelech Mengistu, a fictitious name for anonymity, like many mothers managing a household, is feeling the pinch of rising prices. “I used to buy a set of coffee cups for ETB 250, but now they’re ETB 1,000—that’s four times more,” she shared, shaking her head. Even everyday essentials like onions and teff have become more expensive, making it harder for her to stretch the family budget. “We decided not to buy a chicken this time,” she said, explaining how they had to allocate their budget toward the coffee cups and shift to buying meat instead.

Addis Insight also captured a vibrant scene on the eve of the Ethiopian New Year, with traditional music filling the air and creating a festive backdrop for the bustling market. Yet, a closer look at the market reveals a more complex reality. The price of sheep has surged by ETB 1,000 to 2,000 compared to the last holiday, with the minimum now at ETB 6,000, while eggs are fetching up to ETB 18 each. In contrast, the cost of chicken, a key ingredient in the beloved Ethiopian dish doro wot, has remained relatively stable, ranging from ETB 700 to ETB 1,200.

Interestingly, not all prices are climbing. Some animal by-products are showing a decline, with butter dropping from ETB 1,000 during the last Easter to ETB 900 now. The market snapshot reflects the complexities of holiday shopping amid changing economic conditions, where some prices rise steeply while others offer a rare reprieve. This mixed picture highlights the varied economic pressures that define the holiday season.

This Ethiopian year of 2017 tells a story of both hope and struggle, like two sides of a coin. For some, the sight of new corridors and urban developments sparks dreams of a prosperous future, where the country moves forward with promise and progress. Yet, there’s an undercurrent of anxiety. Recent policy changes, such as the shift to a market-based foreign exchange system, new electricity tariffs, and increased excise taxes, are expected to unintentionally drive up living costs, though their full impact is still unfolding. Families are caught between the excitement of change and the harsh reality of soaring prices, making this New Year a poignant reminder of the mixed emotions that shape everyday life in Ethiopia.