Geopolitical tensions, stalled external debts restructuring detrimental to Ghana’s disinflation trends

Accra: Fitch Solutions, an international rating agency, says Ghana's disinflationary trends could be hampered by geopolitical concerns and stalled foreign debt restructuring, In a report detailing Ghana's inflation and interest dynamics, the rating agency noted that an increase in geopolitical tensions could disrupt global trade, causing further increases in global commodity prices. The rating agency stated that because Ghana was a net importer of both fuel and food, such an increase would raise the cost of imports and undermine the disinflationary process. Ghana's disinflation rate has been drifting downward, with the Ghana Statistical Service reporting 52.2 percent in December 2022, compared to 23.2 percent in the same month in 2023. The Bank of Ghana (BOG) stated that the disinflation process will continue, with headline inflation predicted to fall from 13 to 17 per cent by the end of 2024 before gradually returning to the medium-term target range of 6-10 per cent by 2025. Fitch Solutions also warned that negotiations between Ghana and its commercial creditors could stall and take longer than expected. Ghana's external debt restructuring with government creditors is complete; however, negotiations with commercial creditors are still ongoing. According to the rating agency, this would delay IMF payouts and erode investor confidence, culminating in a Cedi sell-off and a resumption of inflation. The agency said that in both scenarios, the Bank of Ghana (BoG) would embark on a more conservative monetary easing cycle than we currently forecast. Source: Ghana News Agency