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Ghana's inflation soars as IMF deal drags on

Isaac Kaledzi in Accra
March 24, 2023

The West African nation is facing one of its worst economic crises in decades. Soaring inflation is compounding the sufferings of many Ghanaians who now have to dig deeper into their pockets to afford essential goods.

A man holds cedis, the Ghana currency, notes in Accra, Ghana.
The Ghana cedi is weak against the major world currencies such as the dollar and euroImage: Nipah Dennis/AFP

Dela Omar, who works as an IT specialist in Ghana's capital, Accra, used to live very comfortably with his family of five. But in recent months, he has struggled to cope with Ghana's worsening economic crisis.

Omar says he cannot cope with the constant price increment of essential commodities. Moreover, he pointed out that caring for his family is even more challenging now than a year ago.

"Looking at the situation, you need to work extra hard, do other things to add up to your business to be able to make money to take care of the family," Omar told DW.

The inflation rate for February stood at 52.8% according to the Ghana statistical service. That means prices of items have more than doubled compared to last year.

Runaway prices of food items and other commodities mean families like Omar's are in constant distress.

IMF logo
Ghana is seeking $3 billion from the IMF to shore up its economyImage: Maksym Yemelyanov/Zoonar/picture alliance

Impact of inflation on health

"I have a problem that has become chronic. Almost every day, I have a headache because of the pressure on me," Omar said.

According to Omar, paying for a higher rent, children's school fees, and at the same time providing food at home comes with constant challenges amid a worsening economic crisis.

"I am living in a rented apartment, and I have to pay rent, my children's school fees, so putting all those things together gives me [a] headache. I need to do extra things to make money," he said.

Small businesses struggling

But consumers like Omar are not the only ones battling with the issue of runaway commodity prices.

Traders like Sampana Osei, who imports spare car parts in Accra, also feel the pinch.

The prices for his goods are constantly changing, making it difficult for him to reap profits from the capital he invested into his business. Osei blames the unstable nature of the local currency, the cedi, which keeps losing value against major currencies.

Ghanaians in red shirts protesting, holding signs that read "Nkrumah never dies" and "Cedi devaluation"
Ghanaians have been protesting the high cost of livingImage: Ernest Ankomah/Getty Images

Weak currency

"Because the economy is in bad shape, we cannot import much of the items we sell. Eighty percent of our business has collapsed because of unstable prices. The poor performance of the cedi means once we bring in the goods, we have to sell at higher prices," Osei told DW.

Commodity prices have been increasing for months in Ghana, gnawing away people's purchasing power.

There has been some slight stability in fuel prices, but they still are high compared to early last year.

Little progress in the IMF bailout deal

Not much progress has occurred since Ghana announced it was returning to the International Monetary Fund (IMF) to secure a bailout and restore some level of confidence in the economy.

Financial analyst Professor John Gatsi told DW that Ghana was facing its worst run of poor economic conditions in decades.

"We are in a high inflation regime right now and this affects food items and imported items all together," he said.

Women at a market
Many residents are struggling to afford essential commodities due to high inflation.Image: Nipah Dennis/AFP

No short cuts

According to Gatsi, Ghana's over-dependency on imported goods also increases prices. He added that there is no way around the inflation crisis.

"The food items under the inflation basket are primarily items that we could produce ourselves, so it is important for us to awaken and commit our resources and energy to ensuring that we get into the production arena." 

The Ghanaian economist also blamed the current high inflation figures on poor economic decisions by managers of Ghana's economy.

Excessive lending to the central government by the Bank of Ghana to finance government activities was a key reason for the crisis, Gatsi stressed.

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Impact of war in Ukraine and the Covid pandemic

Ghana's government has consistently argued that the COVID-19 pandemic and Russia's invasion of Ukraine negatively affected the economy and triggered higher inflation. However, Gatsi disagrees.

"We are importing tomatoes from the Sahel region worth millions of dollars. This was not done by the Ukraine-Russia war," Gatsi said.

Ghana's debt levels have been unsustainable for years, and the government had to renegotiate its debts with local creditors in a debt exchange program.

It is yet to restructure its debts with external creditors to secure a $3 billion (€2.7 billion) bailout from the IMF. Much of the anticipated loans over three years are to stabilize the country's balance of payments.

The government set a timeline in March to finalize a deal, but that goal seems unlikely. In the meantime, citizens are bracing for more economic hardship.

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Edited by: Chrispin Mwakideu