IMF talks loom — As Ghana misses inflation target
Ghana's inflation performance in 2024 has fallen short of expectations, necessitating fresh discussions with the International Monetary Fund (IMF) regarding policy adjustments.
The country recorded a December inflation rate of 23.8%, significantly higher than both the government's 15% target in the 2024 budget and the Bank of Ghana's revised target of 18%.
In response to a question from the Graphic Business at the Monetary Policy Committee press conference in Accra yesterday, Bank of Ghana Governor, Dr Ernest Addison, acknowledged that the 23.8% inflation rate has reached a critical threshold requiring IMF consultation.
"We need to discuss with the fund about specific policies to guide us back towards our single-digit inflation goal," Addison stated.
Revised timeline
The Bank of Ghana's preliminary assessment has adjusted the timeline for achieving single-digit inflation.
Initially targeted for the first quarter of 2026, projections now indicate this milestone will likely be reached in the second quarter of 2026.
However, Dr Addison emphasised that this timeline depends heavily on the incoming government's economic policies.
"These projections assume continued fiscal consolidation and adherence to IMF programme parameters in future budgets," the governor explained.
"If these conditions are met, we can be confident about meeting our forecasted targets."
2024 inflation journey
While the year-end inflation rate of 23.8% appears similar to January's 23.5%, Dr Addison detailed a more complex narrative.
The rate peaked at nearly 25% in March 2024, primarily due to exchange rate fluctuations. These pressures were partly attributed to the central bank's aggressive reserve-building strategy during the first quarter.
Inflation subsequently improved to 20% by August before climbing back to 23.8% in December.
The governor identified food prices, supply chain disruptions and transportation costs as the main drivers of this increase – areas where monetary policy has limited influence.
Dr Addison highlighted the effectiveness of monetary policy in non-food sectors, where the year-end inflation rate of 20% was notably better than the headline figure.
"Monetary policy achieved its intended effects in 2024. The challenges we faced were predominantly structural, particularly in the food sector," he explained.
IMF programme context
This inflation performance represents a challenge for Ghana, which has been operating under a $3 billion IMF Extended Credit Facility since May 2023.
The programme was established to restore macroeconomic stability, ensure debt sustainability, protect vulnerable populations and create a foundation for inclusive growth.
Ghana’s Finance Minister, Dr Cassiel Ato Forson, last week disclosed that the IMF would send a delegation to Ghana for crucial economic discussions.
The delegation will be in the country from February 10 to 14, 2025, marking an important step in the preparatory phase of Ghana's upcoming budget planning process.
The five-day mission will primarily focus on establishing dialogue with the country's new administration and conducting comprehensive economic reviews.
According to Dr Forson, who made the announcement during a visit to the Ghana Revenue Authority (GRA), a key focus of the discussions will be strategies for revenue generation and improving Ghana's tax-to-GDP ratio.
The IMF team will engage with Ghana's economic leadership to evaluate the current economic landscape and provide strategic guidance on fiscal policy and budget planning.
These consultations are expected to cover various crucial aspects of the nation's economic framework and explore potential financial support mechanisms.
This upcoming visit represents a continuation of Ghana's ongoing collaboration with the IMF to achieve economic stability and secure international financial backing.
The delegation is expected to conduct thorough assessments of the country's economic reform progress, fiscal performance, and identify potential areas for future economic development initiatives.