Cost of living in Ethiopia: the agricultural commodities market

Abstract

Although the Ethiopian government is engaged in a process of modernization and making major financial reforms, there remains lack of solid financial tool that could assist market participants in analyzing the agricultural commodity market positions. Similarly, agricultural policy lacks instruments to shield neither farmers against potential losses induced by reductions in the price of crops they produce nor consumers against the increase in cost of living induced by food price inflation. Accordingly, this study aims to construct a price index for agricultural commodities in Ethiopia. Retail price data for agricultural commodities in five categories: cereals, pulses, oilseeds, root crops, and spices from 2010‑2023 from were collected from the Ethiopian Statistical Service (ESS). The Laspeyres average production quantity weighting index method was used to construct the index. The findings show that prices of agricultural commodities revealed an ever‑increasing trend in all the three regional states and Addis Ababa city administration, despite some variations across the areas. Once the price of a specific crop increases, it is unlikely to decline below its previous average. This persistent and continuing trend in agricultural commodity prices will likely worsen consumers’ lives further and generally boost the cost of living in Ethiopia. As a result, the majority of Ethiopians are struggling to afford basic food items.

Keywords

• Agricultural commodity price
• price index
• cost of living
• commodity
• Ethiopia
• Economics