Eritrea to open more state shops to tackle regulation dilemma

ASMARA, June 28 (AFP) — Faced with chronic shortages of staple goods and high prices at private shops, Eritreans are flocking to new state-run food stores to take advantage of a government experiment in economic re-regulation.

Since the first of the so-called “fair-price shops” opened in May, customers clutching newly issued ration cards — some of whom camp out overnight to ensure purchases — have crowded the shops and made lengthy lines.

“This week I went to the shop at 5:00 a.m. and there were 300 people queueing in front of me,” said one shopper. “Some people come even during the night and sleep there, waiting for the shop to open.”

Government officials allow there are shortcomings, but promise relief in the near future.

“I admit there are queues,” said Eritrean Information Minister Ali Abdu, adding quickly that the country’s lone political party, which is running the shops, would soon more than double the number of outlets to ease congestion.

“It is because there are only 27 fair-price shops,” he told AFP. “But soon, in a few weeks, there will be 65 such shops in Asmara and its suburbs.”

With much of the world moving toward greater market freedom and liberalized economies, Eritrean authorities have gone in the opposite direction in a bid to restore economic stability in the impoverished Horn of Africa nation.

The moves have not been without criticism.

The International Monetary Fund (IMF), which says Eritrea is one of the poorest nations on earth with a per capita GDP of just 130 dollars (105 euros), has cited the controls as a major factor in the country’s economic stagnation.

In its latest report on Eritrea, the IMF highlighted “the adverse impact of the widespread use of administrative controls, the expanding role of the state into commercial activities and the lack of a transparent regulatory environment” on the economy.

Since the beginning of the year, the government has imposed strict new controls on foreign currency transactions, jacked up fuel prices and, in perhaps the most visible move, opened the “fair-price shops.”

“The aim of these fair-price shops is to provide the population with rational prices,” Ali Abdu said, accusing private merchants of boosting prices to unfair levels out of reach of most Eritreans.

“We gave chances to the private traders to decide prices by the market but they exploited the people,” he said, stressing that private shopowners were still allowed to operate their businesses.

The rationing system was announced in March against a backdrop of economic crisis and shortages.

Now each Eritrean family, regardless of its income, receives from its local administration monthly coupons allowing them to purchase products in the fair-price shops.

Staples such as tea, sugar, lentils, oil and pasta are sold at about half the price they fetch in private shops, where it is nearly impossible to find products like sugar anyway.

“You can’t find it in private shops,” one Eritrean said of sugar. When it is available sells for 20 Nafka (1.33 dollars, 1.10 euros) a kilo, more than twice the 7.5 Nafka (50 US cents, 40 euro cents) it runs at a state store.

Coffee at a fair-price shop will set a customer back 50 Nafka (3.33 dollars, 2.75 euros) a kilo, half the 100 Nakfa (6.66 dollars, 5.50 euros) it costs in private stores.

To some, the new system brings back memories of the former communist-backed regime which ruled Ethiopia, which then included Eritrea, from the mid-1970s until 1991 when Eritrea obtained de facto independence.

“These coupons remind me of the time when the Derg ruled,” said one woman.

But Eritrean officials reject such comparisons, maintaining their efforts to promote a market-based economy have been stymied by continuing border tension with neighboring Ethiopia which has kept them on a war-time footing for the past four years.

And many Eritreans seem willing to overlook recollections of hardship and deprivation during those years to buy staples at affordable prices.

“Some products like coffee and sugar, you can’t find in private shops any more so you have to go there,” the woman said.