Ghana’s consumer inflation surged to a four-month high of 25.8% year-on-year in March 2024, up from 23.2% in the prior month and well above the central bank’s target band of 6% to 10%.
The sharper rise in overall inflation was mainly due to a depreciating currency, leading to higher costs for imported goods, according to the statistician chief Samuel Kobina Annim in the capital, Accra, on Wednesday.
Prices quickened for both food (29.6% vs 27% in February) and non-food products (22.6% vs 20%), notably fuels.
The Ghanaian cedi has depreciated by almost 11% against the dollar since the beginning of the year, pressured by a stronger dollar and a decline in cocoa output, as well as delays in debt restructuring.
The cedi has depreciated around 11% this year against the American greenback, making it the fourth worst-performing currency in the world.
The weakness is being stoked by a resurgent dollar as a resilient American economy conspires to keep the greenback strong by pushing back expectations for the start of US interest-rate cuts.
A decline in cocoa production due to adverse weather conditions and debt-restructuring delays are also weighing on sentiment.
The world’s second-largest cocoa producer missed a self-imposed deadline of end-March to finalize a debt revamp deal with its Eurobond holders after rejecting demands to incorporate a so-called value-recovery instrument in the restructuring of $13 billion of obligations.
This mechanism will result in higher interest payments when economic growth accelerates faster than targets set by the International Monetary Fund, which granted Ghana a $3 billion bailout.
“The weakening of the cedi is likely to slow the descent in inflation” and “keep the Bank of Ghana apprehensive to reduce the policy rate further,” said Mark Bohlund a senior credit research analyst at REDD Intelligence ahead of the release.
Last month, Governor Ernest Addison said after the monetary policy committee kept the key interest rate unchanged at 29% that “risks to inflation are slightly on the upside and will require close monitoring.”
Food inflation accelerated to 29.6% from 27% in February and non-food price growth was 22.6% in March, compared with 20% a month earlier. The Monetary Policy Committee will give its next rate decision on May 27.
