In a bid to ease the cost of living and repair macroeconomic imbalances, the Ethiopian government has channeled a massive 440 billion birr ($7.6 billion) into subsidies, a move Prime Minister Abiy Ahmed credits with successfully stabilizing inflation.

The government’s concerted spending effort has paid off, with inflation dropping to 11.7%, the lowest level since the Homegrown Economic Reform Programme was launched in 2019.

The bulk of the expenditure was directed towards critical areas, including subsidies for fuel and fertiliser, increased public sector salaries, and essential social measures such as school feeding programs.

“We have used every possible instrument to ease the cost of living. Our economy is standing tall again,” Ahmed told lawmakers.

Despite this achievement, economic analysts highlight a persistent challenge: while inflation is slowing overall, the prices of food and rent remain “stubbornly high,” dampening the positive impact of wage gains and posing an ongoing challenge for urban households..

Source: Business Insider Africa