Ethiopia inflation rises to 14.5 pct in December

Reuters:

ADDIS ABABA Jan 14  – Ethiopia’s annual inflation jumped to 14.5 percent last month from 10.2 percent in November after a steep rise in food and non-food prices caused in part by two currency devaluations in less than 12 months.

The Central Statistics Agency (CSA) said non-food inflation in Africa’s most populous nation after Nigeria rose to 22.9 percent last month from 16.7 percent the month before. Food prices rose 8.9 percent from 5.8 percent previously.

After soaring in 2008 and 2009, Ethiopian inflation plummeted from July 2009 to October 2009 after the government stopped state borrowing and increased bank reserves.

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The Horn of Africa nation devalued the birr currency ETB= by 16.7 percent in September and is targeting annual inflation of 6 percent over the next five years.

However, analysts say inflation is likely to continue to rise after the devaluation, the fourth sharp drop in the currency’s value since the start of 2009.

Charts suggest the birr, which is now around 16.6 to the dollar, is due another devaluation in a month or so.

Ethiopian Birr inflation

Since August 2008, it has tended to trade broadly flat to the dollar for five to six months, before devaluing sharply.

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The cycle has held true four times in the last two years, over which time the unit has lost more than 40 percent of its value against the dollar.

Prime Minister Meles Zenawi told Reuters in November the September devaluation, the most dramatic of the series, was a “one-off affair” and dismissed concerns it would trigger inflation.

(Additional reporting by Ed Cropley) (Editing by James Macharia and Catherine Evans)

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