Ghana’s Inflation Rate Declines to 35.2%
The consumer inflation rate in Ghana slowed to 35.2% year on year in October from 38.1% in September, the statistics service said on Tuesday. The decline in headline inflation was attributed to moderation in the food price index, supported by government policy redirection.
Still sticky, inflation remains well above the central bank’s target band of 6% to 10%. This became a tall order following the pandemic in 2020. Thereafter, successive US Fed interest rate hikes locked out Ghana from external funding.
According to the statistics office, Prices slowed down for both food and non-food items. The food index moderated to 44.8% from 49.4% in September 2023. Also, 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 prior month, the report from the statistics office showed.
In November, Fitch upgraded Ghana’s credit rating amidst increasing support from multilateral lenders to the government to ease her economic pressures.
Fitch has also assigned ‘CCC’ ratings to four domestic US dollar-denominated bonds issued on 4 September 2023. Accra has recently completed a domestic debt exchange programme.
Fitch considers that as a result of a series of domestic debt exchanges, Ghana has normalised relations with a significant majority of local-currency creditors, with a participation rate of 92% on local-currency government bonds – with similar participation for Cocobills and locally issued foreign-currency bonds.
Some non-participating bondholders are domestic individual bondholders, for which the authorities have publicly stated being current on the payments following a memorandum of understanding signed in May 2023.
The country’s local-currency debt exchanges represent a debt service reduction of GHS52 billion in 2023 (6% of estimated 2023 GDP or 39% of estimated 2023 revenue and grants).
According to the IMF, debt service represented 117% of revenue in 2022. Of this total debt service reduction, we estimate the interest payment reduction in 2023 amounts to 1.8% of GDP or 12% of revenue and grants.
The domestic US dollar-denominated debt exchange adds another GHS5 billion debt service reduction in 2023, and a further reduction is coming 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 a still high 38% of revenue and grants in 2023, from 47% in 2022, Fitch said in a November ratings note.
