Drivers and Impact of Ethiopia's Inflation

Food and non-alcoholic beverages constitute 53.5 percent of Ethiopia's Consumer Price Index (CPI), meaning a 15 percent rise in food prices contributes about eight percentage points to headline inflation. The supply chain relies heavily on imports, with farmers in Oromia and Amhara using imported fertilizer and diesel to produce and transport goods like teff to Addis Ababa. A weaker Ethiopian Birr increases the cost of these inputs before products reach the market. Global factors, specifically the Hormuz crisis, have exacerbated these issues by causing nitrogen fertilizer prices to rise by 25 to 50 percent and diesel costs to increase by 25 to 55 percent internationally, further driving domestic inflation.