Ghana Inflation Hits 54.1% amidst Debt Talks

Amidst pressure on the price level, and discussion on debt exchange talk, Ghana’s headline inflation rate accelerates to 54.1% year on year in December, up from 50.3% the previous month, the statistics office said on Wednesday (January 11, 2023).

The worsening inflation rate in the country was driven by upward adjustment in Ghana’s food index, in addition to depreciated local currency. The price level has worsened beyond the Bank of Ghana’s target as monetary policy appears to be ineffective to stem consumer index acceleration.

Ghana is in talks with local investors about debt exchange following heavy burden of interest payments obligation on its $47 billion debts. One of top Africa’s cocoa producing nations is battling its worst economic crisis.

Recall Ghana obtained support from the multilateral lender, the International Monetary Fund of about $3 billion late in 2022.

The local cedi dropped heavily against the dollar last year, as government spending cuts and central bank interest rate hikes failed to tame inflation. In December 2022, Ghana secured a staff-level agreement with the IMF for a $3 billion, three-year support package.

Debt Exchange

Ghana’s finance ministry on Wednesday (January 11, 2023) said negotiations on the terms of a domestic debt exchange agreement with local pension funds were continuing and that they would be made public once an agreement on the details is reached.

The deal will only be approved by the IMF board if Ghana undergoes comprehensive debt restructuring, the fund has said.

“Were the participation to the domestic debt exchange too low, the perennity of the Government’s efforts to resolve the current crisis and the expected international financial support would be jeopardized,” the finance ministry said in a Q&A document.

It added this would put “further strains on the Government’s capacity to honour its commitments and repay its debt.” Ghana’s public debt was 467.4 billion cedis or $46.7 billion in September 2022, of which 42% was domestic debt, according to the most recent central bank figures.