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Ghana’s consumer inflation rate showed a decline, reaching 35.2% year-on-year in October, down from 38.1% in September, as reported by the statistics service on Tuesday. The reduction in headline inflation was attributed to a moderation in the food price index, supported by a shift in government policy.
Despite this improvement, inflation persists significantly above the central bank’s target band of 6% to 10%, which became challenging following the pandemic in 2020. Subsequent US Fed interest rate hikes restricted Ghana’s access to external funding.
The statistics office highlighted that both food and non-food items experienced slowed price growth. The food index moderated to 44.8% from September’s 49.4%, while non-food items retreated to 27.7% from 29.3%.
On a monthly basis, consumer prices rose by 0.6% in October, slowing from a 1.9% surge in the previous month, according to the statistics office report.
In November, Fitch upgraded Ghana’s credit rating amid increased support from multilateral lenders, helping alleviate economic pressures. Fitch assigned ‘CCC’ ratings to four domestic US dollar-denominated bonds issued on September 4, 2023. Accra recently completed a domestic debt exchange program.
Fitch acknowledged that Ghana, through domestic debt exchanges, has normalized relations with a significant majority of local-currency creditors, representing a debt service reduction of GHS52 billion in 2023 (6% of estimated 2023 GDP or 39% of estimated 2023 revenue and grants).
The IMF reported that debt service represented 117% of revenue in 2022. Fitch estimated the interest payment reduction in 2023 to be 1.8% of GDP or 12% of revenue and grants.
The domestic US dollar-denominated debt exchange added another GHS5 billion debt service reduction in 2023, and further reduction is expected from the 50% principal haircut agreed with the Bank of Ghana on its holdings of GHS71 billion local-currency non-marketable debt.
These debt exchanges have brought down interest payments to 38% of revenue and grants in 2023, from 47% in 2022, according to Fitch’s November ratings note.
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