Inflation rate currently stands at 17 per cent and about 8 million people require food aid.

Presenting his mid-year report to parliament Tuesday, Mr Zenawi said the national economy has been growing at 10 per cent annually for the past five years, and that this will rise to 10.8 cent  this year.

“Our export trade has grown by 32 per cent in the past eight months, which means that we will achieve our goal for the year successfully,” he said.

The PM, however, acknowledged that inflation was worsening. “Even though our main objective is being achieved, our endeavour to control inflation has not yielded the desired result,” he said.

He attributed the problem to the high price of petroleum and increasing demand for food grains, adding that the international crisis is very complex.

“The problem cannot be tackled by Ethiopia alone. It’s obvious we don’t have the economic capacity to control the global market,” the PM said.

He, however, announced various schemes to minimise the impact of the high fuel prices and worsening local inflation. These include the removal of value-added tax and turnover tax from grains and continued direct and indirect subsidies on basic goods for poor urban dwellers.

The government currently subsidizes the cost of fuel, food and cement to the tune of $500 million annually.

“Subsidies at such a high cost, even temporarily, are very difficult to bear for a poor country like ours,” the PM noted.

However, opposition MPs questioned the government’s performance, saying it was responsible for the country’s economic problems.

“You (Meles) are responsible for the current economic crisis and it’s due to your party’s failure and incompetence. I believe you should resign, like accountable leaders do,” Temesgen Zewdie, a former member of the Coalition for Unity and Democracy party now working on creating a new party said.

Meanwhile, Lidetu Ayalew of the Ethiopian Democratic Party expressed scepticism about the government’s achievement. “It’s not equitable and is not benefiting the poor; it’s not even sustainable,” he said.

Bulcha Demeksa of the Oromo Federalist Democratic Movement also blamed the government for the economic crisis, attributing it to Ethiopia’s intervention in neighbouring Somalia. “I don’t think it’s fair to spend millions of dollars in Somalia when millions of our people are starving and our inflation rate had reached an alarming level,” he said.

Opposition MPs also raised a number of questions regarding the prevailing drought in various  parts of the country, but Mr Zenawi downplayed the situation. “It’s due to the failure of mid- year rains and the situation in some parts of the country needs close observation. We are closely working with regional governments and there is no serious threat as you (opposition MPs) say,” he said.

The PM said the drought would not seriously affect the government’s economic programmes.

Meanwhile, humanitarian agencies have been issuing warnings on the worsening drought, mainly in the eastern and south-eastern parts of the country. They estimate that more than eight million people require food aid.

Recently, local authorities confirmed that thousands of livestock had died in Borana in the Oromia region, which is among the hardest hit by drought.

And according to the UN office in Addis Ababa, more than 14,300 livestock deaths were reported. Human deaths related to hunger have also been recorded in hospitals in the region.

Mr Zenawi promised to do more to stabilise the economy and protect the poor. One measure involves setting up a task force comprising the police, national security and intelligence services and the Ministry of Trade and Industry, to permanently monitor illicit activities and institute legal measures promptly.

In recent weeks, the government has raided and closed down a number of black market foreign exchange shops and arrested hundreds of “illegal” traders accused of inflating food prices.

Drought worsens in Ethiopia

ADDIS ABABA - Many parts of eastern and southern Ethiopia are experiencing severe drought after the rains failed last year

One of the worst hit regions is Borana, some 650 kilometres south of Addis Ababa in Oromia state, which neighbours Kenya.

"Six people have died in Dire and Moyale districts. We are now struggling to deliver food and medical supplies," the Borana region's administrator, Abdulkadir Abdi, told journalists visiting the area. Three children and two adults have died in Liben and Guji districts in the region's east and north respectively.

Hospital sources confirmed that the deaths were related to hunger and lack of clean water.

Chala Wordofa, the head of Oromia's Disaster Prevention and Control office, acknowledged that parts of the region have had a long dry season, but added that the authorities are keenly monitoring the situation.

"At the moment there is no immediate threat, but things could get out of control if sufficient quantities of food and water are not delivered on time," he said.

However, speaking in Parliament on Tuesday, Ethiopian Prime Minster Meles Zenawi downplayed the situation in Borana, saying it was simply due to "failure of the mid-year (meher) rains and will not affect our speedy economic growth".

Mr Zenawi dismissed the reports of human and livestock deaths during his briefing to parliament on national economic issues, but opposition MPs said the situation was critical and called for urgent government action.

According to a report by humanitarian agencies, about 8 million people in Ethiopia require food aid, 1 million of them urgently.

Ironically, Ethiopia is facing a food crisis when crop production has risen by 45 per cent in the past five years.

UN and international agencies working on the ground refused to quoted by the media unless the information was confirmed by Ethiopian government officials.

"We know how the situation is worsening but the Ethiopian government is sensitive to a single press statement," a senior UN official in Addis Ababa said.

However, a UN assessment report indicates that 29 schools have been forced to close and more than 4,000 children have dropped out of school in Borana district due to severe climatic conditions and migration by the local pastoral community.

According to aid agencies, the drought could affect the government’s ambitious plan to increase school enrollment to 80 per cent in the area as part of the national development programme.

Thousands of animals have died since the beginning of this year, and livestock deaths have reached alarming levels.