Some economic analysts have raised doubts regarding the International Monetary Fund’s (IMF) prediction that Ghana’s inflation will decrease to single digits by the end of 2025.
According to the IMF’s Economic Outlook Report, Ghana is expected to achieve an end-of-year inflation rate of 8 percent, which coincides with the government’s objectives outlined in the 2024 budget.
The Finance Minister’s remarks on the budget suggest an anticipated drop in inflation from 29.4 percent in 2023 to 15 percent in 2024, with further reductions to 8 percent from 2025 onwards.
The IMF’s forecast corresponds with the Bank of Ghana’s target for a 15 percent year-end inflation rate in 2024.
Also, these forecasts depend on the government’s successful implementation of measures under the IMF program and the Bank of Ghana’s commitment to tight monetary policies.
Inflation Concerns And Economic Debate
However, some observers remain skeptical about the feasibility of reaching single-digit inflation by the end of 2025.
Professor Lord Mensah, an associate professor at the University of Ghana Business School, recognizes the positive outlook presented by the IMF’s forecast.
However, he highlighted the potential obstacles that could emerge in executing the required economic policies and structural reforms within Ghana’s economic framework.
“We are about to resume our debt payment, external debt payment after negotiations. I mean that is when we get to know the pro level of the exchange debt, even though our debt service will come down, the government will definitely be on the same market looking for dollars to go and pay for this debt.
“And we know very well that the exchange rate depreciates, it tends to have a true effect on inflation because we live in a country where the dominant or the essentials of our living which has to do with fuel usage and all those which we don’t manufacture here in Ghana.”
Professor Lord Mensah
Professor James Atta Peprah, an Associate Professor of Economics at the University of Cape Coast, offered a dissenting view on the IMF’s projection.
He pointed to factors such as the cost of conducting business in Ghana and the potential repercussions of power outages (known as “dumsor”) on inflationary pressures.
Peprah questioned the plausibility of reducing price levels if the country continues to experience power outages until the end of the year.
“Look at the cost of doing business in Ghana. Look at dumsor, dumsor we’ve found ourselves in. All these factors compound, and contribute to rising prices so if we should find ourselves in this dumsor situation till December, how can price levels come down.”
Professor James Atta Peprah
Mix Signals
Aside from the inflation forecast, the International Monetary Fund also forecasted a strong economic growth of 4.4% for Ghana in 2025, marking a notable improvement from the 2.8% growth projected for 2024.
This suggests that the Ghanaian economy is expected to expand at a faster rate in the coming year.
However, the IMF also anticipates a decline of 2.2% in Ghana’s current account balance. This measure reflects the country’s trade and financial activities, indicating a potential decrease in the balance between exports and imports, as well as other financial transactions.
This projection highlights a possible challenge for Ghana’s economic stability in the near future.
The IMF’s optimistic forecast for Ghana’s inflation reduction to single digits by 2025 faces doubts due to various economic factors.
While the country aims for significant inflation decreases aligned with IMF and government targets, challenges like debt repayment, exchange rate fluctuations, and persistent power outages could hinder progress.
Time will reveal the true trajectory of Ghana’s inflation amidst economic complexities.
READ ALSO: Palestinian Aspiration Cast Aside In A Single Stroke
