The government of Ghana has revised its end of year inflation target for the 2022 fiscal year upwards by 20.5 percentage points to 28.5 percent, up from 8 percent initially targeted at the beginning of the year.

The revision was as a result of the recent developments within the global economy which resulted in record-high inflation rates across the globe and in Ghana.

The two inflation readings since the Monetary Policy Committee (MPC) met in May this year pointed to continued broad-based upward pressure on prices, reflecting the pass-through effects of increases in ex-pump petroleum prices, transport costs, currency depreciation, and food prices.

Headline inflation increased markedly from 23.6 percent in April 2022 to 27.6 percent in May, and then further up to 29.8 percent in June. Food inflation went up from 26.6 percent in April to 30.1 percent in May, and then to 30.7 percent in June 2022. On the other hand, non-food inflation moved from 21.3 percent to 25.7 percent, and then to 29.1 percent in June 2022.

Similar to the observed trends in headline inflation, underlying inflation pressures have also risen sharply. According to the Bank of Ghana (BoG), its core inflation measure, defined to exclude energy and utility, rose from 22.3 percent in April 2022 to 26.4 percent in May, and then to 28.4 percent in June.

In addition, weighted inflation expectations from businesses, banks, and consumers remained elevated in June 2022, the BoG highlighted in its July MPC meetings.

The pace of month-on-month inflation has, however, slowed for the second consecutive time. After increasing by 5.1 percent in April 2022, the monthly headline inflation slowed to 4.1 percent in May, and then to 3.0 percent in June.

Month-on-month food inflation also increased at a rate of 5.8 percent in April, 4.0 percent in May and eased to 2.3 percent in June 2022. Similarly, non-food monthly inflation also slowed from 4.6 percent in April to 4.1 percent in May, and further down to 3.6 percent in June 2022.

Measures to reduce inflation

Finance Minister, Ken Ofori-Atta, disclosed that the Bank of Ghana is taking measures to help reduce inflation and has introduced a major critical measure to help stabilize the cedi.

This, according to Hon. Ofori-Atta, is for the BoG “to exercise Ghana’s first right of refusal to gold produced here and, for the first time in the Fourth Republic, at least, build a strong gold reserves culture to protect the cedi better, moving forward”.

Ghana’s Gross International Reserves declined to US$7.7 billion at the end of June 2022, equivalent to 3.4 months of import cover, compared with US$9.7 billion (4.3 months of imports) at the end of December 2021. The decline in the reserve buffer, alongside unfavorable global financing conditions, exerted significant pressures on the foreign exchange market.

Consequently, the Ghana Cedi cumulatively depreciated against all the three major currencies; 19.2 percent against the US dollar, 8.8 percent against the Pound Sterling, and 10.0 percent against the Euro as at July 20, 2022.

In the corresponding period of 2021, the Ghana cedi depreciated by 0.6 and 0.7 percent against the US dollar and the Pound Sterling, and appreciated by 3.3 percent against the Euro, according to the Bank of Ghana.