Addis Ababa, February 4, 2026 (FMC) – Prime Minister Abiy Ahmed announced that Ethiopia’s inflation rate has declined to 9.7 percent, describing the development as a major achievement resulting from years of sustained macroeconomic management and structural reforms.
Responding to questions from members of the House of People’s Representatives on Tuesday, the Prime Minister outlined the wide-ranging measures implemented to curb inflation and stabilize the cost of living. He said the combination of targeted subsidies, income adjustments, supply-chain reforms, and improvements in essential public services such as electricity and water has enabled the country to reduce inflation to single digits for the first time in many years.
“Through subsidies, income increments, and improvements in the supply chain — including work done in electricity and water — Ethiopia has, for the first time, cut inflation to 9.7 percent. This is a significant achievement. It is a major victory,” the Prime Minister said.
Despite the progress, he acknowledged that further reductions are required to ease pressure on citizens and ensure sustainable price stability. He identified several priority sectors where long-term interventions are underway to address the structural drivers of inflation and reduce the cost-of-living burden.
The first area of focus, he said, is food production and distribution. To improve market access and stabilize prices, the government has established hundreds of food booths linked to corridor development projects across the country.
Housing was cited as the second critical challenge. The Prime Minister noted that stabilizing rental prices, even at moderate levels, would significantly ease the strain on workers and urban residents facing rising living costs. In this regard, he said the government is actively pursuing a national initiative to construct 1.5 million housing units in the coming years, acknowledging that while the target is ambitious, it remains modest compared to the scale of the country’s housing demand.
Transportation constitutes the third major pillar of the government’s inflation-control strategy. The Prime Minister said Ethiopia is transitioning public transport systems to operate on natural gas, including by manufacturing buses designed to run on gas-powered engines. He explained that existing engines are being removed from buses produced locally and replaced with natural gas engines.
He acknowledged that the transition has been technically demanding, largely due to shortages of skilled and adequately trained professionals, and that converting conventional engines initially required considerable time and expertise. Nevertheless, he said most of the conversions will be completed within the next six months. Beginning next year, natural gas-powered public transport will be expanded in Addis Ababa and gradually extended to other cities and regions, helping to reduce transportation costs.
Education and school feeding programs also form part of the government’s broader inflation-mitigation efforts, the Prime Minister said. Expanding school feeding initiatives is essential to protecting vulnerable communities and ensuring that economic hardship does not prevent children from attending school.
Beyond price stabilization, the Prime Minister stressed that raising incomes remains a critical and durable response to inflationary pressures. “Income grows when the economy grows,” he said, underscoring the link between macroeconomic expansion and improved household purchasing power.
He added that the cumulative impact of ongoing reforms and structural measures will continue to ease inflationary pressures over time. “The results we have achieved are impressive, but the work that remains is substantial,” he concluded.
The government’s approach reflects a shift away from short-term stabilization toward long-term structural solutions aimed at expanding supply capacity, easing systemic bottlenecks, and strengthening citizens’ purchasing power.