Working Paper
The Political Economy of Food Price

the Case of Ethiopia

Food prices increased significantly in 2007–08 in Ethiopia due to several supply- and demand-side factors. The Ethiopian government released emergency food grain reserves, imported and distributed wheat at subsidized price, banned the export of staple cereals, and removed value added and turnover taxes on food items. It also increased the reserve requirement of commercial banks and reduced domestic borrowing by public enterprises. These measures were mostly initiated by the government and the role of interest groups as well as local and international actors has been limited. These measures were taken to prevent potential social unrest and maintain macro-economic stability.