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Cablegate: Inflation Reaches 64 Percent

VZCZCXRO8419
PP RUEHROV
DE RUEHDS #2325 2390437
ZNR UUUUU ZZH
P 260437Z AUG 08
FM AMEMBASSY ADDIS ABABA
TO RUEHC/SECSTATE WASHDC PRIORITY 1792
INFO RUCNIAD/IGAD COLLECTIVE PRIORITY
RUEPADJ/CJTF HOA PRIORITY
RUEAIIA/CIA WASHINGTON DC PRIORITY
RUEKDIA/DIA WASHINGTON DC PRIORITY
RHMFIUU/HQ USCENTCOM MACDILL AFB FL PRIORITY
RUEKJCS/JOINT STAFF WASHINGTON DC PRIORITY
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHLMC/MILLENNIUM CHALLENGE CORP
RUEHFSC/USOFFICE FSC CHARLESTON 9951

UNCLAS ADDIS ABABA 002325

SENSITIVE
SIPDIS

HR/OE FOR MICHELE MORRIS AND KUMIAH HARRISON
AF/EX FOR STEVEN TOY

E.O. 12958: N/A
TAGS: ALOW ECON PGOV ET
SUBJECT: INFLATION REACHES 64 PERCENT

REF: ADDIS 1943

This is an action request, please see para 4.

INFLATION SPIKES...
-------------------

1. (U) The Ethiopian Central Statistics Agency (CSA) released July
2007 to July 2008 inflation figures on August 15. Over the past
twelve months, overall headline inflation reached 64.2 percent, food
inflation skyrocketed to 91.8 percent, and inflation on cereals rose
to 171.9 percent. These figures represent a stark increase over the
June-to-June figures of 55.3, 78.2, and 132.5 percent figures,
respectively, reported in reftel.

2. (SBU) While it has been almost a year since the rate of inflation
broke into a gallop, economists expect inflation rates to continue
to grow over the coming months as produce from the main harvest
season is not expected to reach markets until late-November. The
government started distributing subsidized wheat in Addis Ababa and
other cities this month to mitigate the effects of inflation. With
the government already facing peaked public scrutiny over prices, it
will be under significant pressure to show a slowing of the rate of
inflation in August. Economists and pundits have already begun
questioning if the official CSA figures reflect the true rate of
inflation. The August and September figures will, therefore, face
even greater suspicion.

...AND HURTS LES COLLEAGUES
---------------------------

3. (U) For Embassy Addis, the greatest impact of inflation is on our
locally engaged staff (LES). Increasingly LES colleagues are
voicing concerns that inadequate cost of living adjustments are
rendering Post's local compensation plan uncompetitive as compared
to other organizations in the job market. This message is
increasingly echoed by Post's first choice applicants to fill
vacancies who turn down job offers due to inadequate salaries and
benefit packages. This evidence suggests that the market for
technical and high level administrative positions reaches beyond the
U.S. Mission's local compensation plan. Even if congruent, Post's
next salary survey will not be conducted until 2009, while LES food
bills have doubled since July 2007.

ACTION REQUEST
--------------

4. (U) To avoid losing good LES staff members, while maintaining
their purchasing power, Post strongly requests HR/OE and AF/EX to
increase the meals and miscellaneous portions of Embassy Addis's
salary structure. As the meals portion, in particular, has not
increased for several years, during which time food prices have more
than doubled, Embassy Addis views this step as critical to maintain
staff morale and retain our LES colleagues.

MALAC

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