Addis Ababa — The government should intensify measures on enhancing production and productivity to reduce the prevailing inflation, scholars said.
Prime Minister Abiy Ahmed told members of the parliament that the government is undertaking various measures to reduce inflation such as subsidizing fertilizer and fuel.
In an exclusive interview with ENA, Senior Economist and President of African Chamber of Commerce Kibur Gena said that the government should give due attention to reduce the internally generated inflation through increasing production and productivity.
“One of the area or entity that has pushed the inflation rate higher are also banks which tend to lend actually to companies like real estate or those that focus on consumption; which makes it difficult for the manufacturing or agriculture sector to increase its production and make it available on the market. So there are combinations of government and banks that have role in creating inflation but at this moment we see both the banking institutions and the government trying hard to restrict the circulation of money in Ethiopia,” he elaborated.
In the advent of limiting cash circulation to lower inflation, financial institutions should be cautious of its essentiality, Kibur pointed out.
The senior economist emphasized the need to ensure sustainable peace and create business enabling environment in order to attract Foreign Direct Investment (FDI) thereby ascertaining the desired economic growth.
However, the senior economist noted that economic growth would be difficult unless the government devises means to increase its foreign currency revenue by minimizing foreign exchange black-market.
Africa Humanitarian Action Vice President and Senior Economist, Costantinos Berhe on his part said that new tools are needed to be able to contain the inflation and reduce it to single digit.
Inflation is a precipitation of a whole lot of economic policies, he stated, and added that those policies need to come in together to redeem this problem.
“The government for example, has huge capital projects that it is developing. Therefore, how can some of these capital projects be done at latter date and then we go into saving the economy, subsidizing the consumers,” he noted.
He hoped that the monetary measures would bring about an impact in reducing the inflation.
Limiting the circulation of cash in the economy can contribute to minimizing inflation; however, it is pivotal to once again look into the banks interest rate, he elaborated.
Broader consultations with different pertinent stakeholders and research based solutions are essential to contain and minimize the inflation, Costantinos pointed out.