Ethiopia's foreign exchange rate reform triggers soaring prices: Video

After barely two months, the policy implemented with good intentions seems to have backfired as many Ethiopians currently face a significant economic upheaval, especially price hikes.

In the capital, Addis Ababa's biggest marketplace, Merkato, vendors and buyers cry wolf about the huge sums of money they need to sell their goods for and buy at respectively.

According to Abubakar Jemal, a shopkeeper who spoke to AFP, sales are slow due to the continuous increase in prices.

"When the cost of an item increases, the only option is to raise the price and sell it at a higher rate. As you can see, business has slowed down because of this. Since the dollar increased, the business has been slow," he stated.

Medanit Woldegebriel who is a clothes shop owner, detailed the exact price hikes her business had witnessed over the last few months. Holding onto a shirt from her collection she explained: "These shirts used to be 1500 birr ($13), and now they're 2500 birr ($21.5). It's the same for these sweaters; they used to be 1200 birr ($10.3), and now they're 1800 birr ($15.5)."

The National Bank of Ethiopia's decision to shift from a fixed to a market-based exchange rate, backed by the International Monetary Fund (IMF), has resulted in the Ethiopian birr losing 30% of its value. This move, aimed at stabilising the economy and attracting foreign investment, has had immediate and profound impacts on the cost of living.

The urban poor are among the hardest hit by these changes. With wages remaining stagnant, the increased cost of living has made it difficult for many to make ends meet. Pensioners and low-income workers are particularly vulnerable, as their fixed incomes are quickly eroded by inflation.