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Ghana Inflation Falls More Than Estimates on Lower Fuel, Food Costs
(Bloomberg) -- Ghana’s inflation rate fell more than expected in March on a sharp drop in food and gasoline prices and is likely to continue the downswing because of a stronger currency.
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Annual inflation slowed for a third straight month to 45% from 52.8% in February, Government Statistician Samuel Kobina Annim told reporters Wednesday in the capital, Accra. The median estimate of seven economists in a Bloomberg survey was 49.8%.
The deceleration was broad-based. The food inflation rate fell for a successive month to 50.8% from 59.1% in February, while non-food price growth slowed to 40.6% from 47.9%.
“For the first time in several months we haven’t seen petrol and diesel as top items,” Annim said.
Prices declined 1.2% in the month. “The last time we saw deflation on a month on month basis was in December 2020,” Annim said.
Currency Resurgence
A stronger cedi will likely see inflation soften further and ease pressure on the central bank’s monetary policy committee to extend its steepest-ever phase of tightening when it meets in May, after raising the key interest rate last month.
The MPC has lifted borrowing costs by 16 percentage points since November 2021 to stem the currency’s decline against the dollar and tame inflation, which is more than four times the 10% ceiling of its target range. The Bank of Ghana expects the inflation rate to fall to 29% by year-end.
Ghana’s currency, which was buffeted last year by investor concern about its ballooning loans, has appreciated almost 13% against the dollar since the start of February. That’s after it weakened 17% in January.
The currency has strengthened on reduced demand for dollars because of a program to buy refined fuel using gold revenue and a decision by the government to stop payments on eurobonds and other external debt in December. Expectations that a final deal with the International Monetary Fund for a $3 billion bailout is imminent has also been a factor, with Ghana having achieved most of the required prior actions.
Read more: Ghana Looks to Secure IMF Bailout Prior to Eurobond Restructure
“China is beginning to play ball and a creditor committee is almost upon us so everything is falling in place for Ghana to approach the board for a possible approval,” Courage Boti, an economist at Accra-based GCB Capital Ltd., said ahead of the release. “Inflation will trend downward at a steeper rate from April, propelled also by a positive base effect.”
--With assistance from Yinka Ibukun and Simbarashe Gumbo.
(Updates with more details on currency in paragraph six)
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