‘Seun Ibukun-Oni, Abuja
DAILY COURIER – The International Monetary Fund has said inflation, debt, and forex crisis is pushing the economy and of most sub-Saharan African economies to the brink.
The Managing Director of the IMF, Kristalina Georgieva, said ministers of finance and central bank governors on the continent disclosed this to her this week.
She added that most countries on the continent could raise money from the global financial markets and do not have large domestic markets to turn to.
She stated, “The particularly difficult conditions in many African countries at this moment is important to consider. In my meeting with Ministers of Finance and Central Bank Governors from the continent this week, many highlighted how the effects of this, entirely exogenous, shock was pushing their economies to the brink.
“The effect of higher food prices is being felt acutely as food accounts for a higher share of income. Inflation, fiscal, debt and balance of payments pressures are all intensifying. Most are now completely shut out from global financial markets; and unlike other regions don’t have large domestic markets to turn to.
“Against this backdrop, they are calling on the international community to come up with bold measures to support their people. This is a call we need to heed.”
Ghana’s inflation rate jumped to the highest level in almost 19 years as bus fares and other transport costs surged.
Annual inflation accelerated to 29.8% in June from 27.6% a month prior, Government Statistician Samuel Kobina Annim told reporters Wednesday on a conference call. That’s the fastest pace since December 2003, and the rate has now exceeded the central bank’s target band of 6% to 10% for 10 months. The median estimate of seven economists in a Bloomberg survey was 29.9%.
The gap between the rise in prices of imported and domestic goods widened to the biggest since December, a sign that the weakening cedi — Africa’s worst-performing currency this year — is pushing inflation higher. The cedi has weakened 24% since January.
Cedi Inflation
Ghana’s imported inflation is widening over local goods
The sustained increase in prices has triggered protests in the West African nation and calls for cost-of-living allowances. With economic conditions deteriorating, Ghana’s central bank will be hard pressed to increase its key interest rate for a third time this year after hiking by 550 basis points since November.
“The Bank of Ghana would want to hold the rate to see how its intervention has filtered through the market, especially when most of what is happening is supply-side driven,” Courage Kwesi Boti, an economist at Accra-based GCB Capital Ltd., said before the release. It will also give the monetary policy committee time to assess the impact policies announced by the Finance Ministry in its mid-term budget review later this month will have on taming inflation, he said.
Africa’s second-biggest cocoa producer postponed the budget review until initial meetings with the International Monetary Fund for an economic program have been completed. The government approached the IMF for funding this month, reversing course after repeatedly saying it would not seek a monetary program. It’s seeking as much as $1.5 billion from the lender to shore up its finances.
An IMF team arrived in the country last week for talks and is scheduled to conclude its visit on Wednesday.
Annual food-price growth quickened to 30.7% from 30.1% in May and non-food inflation accelerated to 29.1% in June from 25.7% the previous month, with transport costs surging 41.6%. Prices climbed 3% in the month.
In a report titled, ‘Facing a Darkening Economic Outlook: How the G20 Can Respond,’ on the IMF’s website. The report, which was released on Wednesday, is a backdrop to the meeting that G20 ministers and central bank governors will have in Bali later this week.
According to the MD of the Washington-based lender, the human and economic impact of the war in Ukraine has worsened with commodity price shocks and an increase in cost of living leading to a crisis for hundreds of millions of people.
She said inflation is now higher than expected and has broadened beyond food and energy prices which has prompted major central banks to announce further monetary tightening.
She disclosed the fund would downgrade its global growth projection for both 2022 and 2023 in its World Economic Outlook update later this month.
She explained that it is going to be a tough 2022, and the possibility of a tougher 2023 is quickly materialising.
Georgieva stated, “It is going to be a tough 2022—and possibly an even tougher 2023, with increased risk of recession.
“That is why we need decisive action and strong international cooperation, led by the G20. Our new report to the G20 outlines policies that countries can use to navigate this sea of troubles.”
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