Despite the hawkish stance of the Ghana Central Bank to increase interest rates, Ghana’s inflation accelerated to 27.6% year-on-year in May from 23.6% in April, hitting a new 18-year peak.

This was disclosed by Ghana Statistical Service In a press release titled “Ghana, May 2022 Consumer Price Index And Inflation”

The Central bank of Ghana hiked its main interest rate in March and again last month to try to stem runaway inflation, but it is yet to halt the rise in prices. Ghana’s central bank raised its main interest rate by 200 basis points to 19% to curb inflationary pressures and promote macroeconomic stability, Governor Ernest Addison said.

What you should know

  • Food, transportation, and housing drove up inflation in May, with imported items rising faster than locally produced goods for the second month in a row, according to the statistics office.
  • In May, food costs increased by 30.1% year-over-year, with the highest increases occurring in oils and fats, water, and cereal items.
  • Around a quarter of Ghana’s cereals are imported from Russia, which is embroiled in a conflict in Ukraine that has driven global commodity prices such as wheat and oil skyrocketing.
  • Transport, which includes fuel, registered a price growth of 39.0% while housing, which includes water, electricity and gas, saw a 32.3% increase.
  • At a time of high commodity prices, especially oil, gold, and cocoa which Ghana boasts of exporting, the local currency, the Ghanaian cedi, continues to depreciate, fuelling inflationary pressures and undermining the sentiment of the monetary policy authorities toward stimulating productive activities in the real sector.
  • The cedi currency has been under pressure, losing around 5% against the dollar since its May 9 close and more than 21% since the start of the year.

What experts are saying

Razia Khan, Chief Africa economist at Standard Chartered, said inflation in May had accelerated much faster than expected.

“While both the March and May tightening by the Bank of Ghana will take time to filter through to the real economy, the concern will be the implication of all of this for the fiscal outlook,” she said.

Courage Marty, an economist with Accra-based Databank Group told Bloomberg that the introduction of a 1.5% tax on electronic payments, which was approved by parliament in late March to help the government reduce its budget deficit added to the inflationary pressures

He said, “The cost pressures continue to be strong in May and with the impact of the E-levy,” he added that “We expect inflation to rise above 24%. The high level of increases in energy prices will push annual inflation higher.”

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