The Institute of Economic Affairs (IEA) has urged the Bank of Ghana (BoG) and the government to work together more effectively to address Ghana’s persistently high inflation.
According to the IEA, inflation won’t come down on its own—bold, targeted interventions are needed, especially in food prices, energy prices, and the exchange rate, which have historically been the biggest drivers of rising costs in the country.
“What needs to be done to reduce inflation significantly is for the Bank of Ghana and Government to collaborate to target directly food prices, energy prices, and the exchange rate,” the IEA emphasized in its bi-monthly economic outlook.
The think tank warned that if action isn’t taken, Ghana’s economic growth and trade competitiveness could suffer. With major trading partners keeping their inflation rates low, Ghanaian exports could lose their appeal, widening the trade deficit and making the economy even more vulnerable.
To prevent this, the IEA stressed the need for “stronger intervention measures” to bring inflation down to levels that ensure both economic stability and competitiveness. “This means that inflation would have to be reduced even further through stronger intervention measures,” it concluded.
Looking ahead, the IEA projects that Ghana’s inflation rate will be between 15% and 17% in 2025, far higher than the IMF’s 8% projection and the BoG’s 8 ± 2% target.
The think tank noted that Ghana’s history with inflation makes the IMF’s forecast seem overly ambitious, given past struggles in keeping inflation in check. Even if Ghana manages to bring inflation down to 8.0% between 2025-29, the IEA pointed out that it would still be higher than the country’s major trading partners, leaving Ghana at a disadvantage on the global market.
Ghana ended 2024 with an inflation rate of 23.8%, slightly higher than November’s 23.0% and well above the IMF’s projection of 18.0%. Inflation throughout the year stayed in the low twenties, far exceeding the BoG’s target, raising questions about the effectiveness of current policies.
A closer look at 2024’s inflation trend reveals a bumpy ride. The year started with inflation at 23.5% in January, climbing to 25.8% by March and peaking in April at 25.8%. By mid-year, inflation dropped to 22.8% in June and 20.9% in July, showing signs of improvement.
However, by September, it settled at 21.5% before surging again in the last quarter, reaching 23.0% in November and closing the year at 23.8% in December.
This back-and-forth trend suggests that inflation remains stubborn, easing temporarily but quickly rebounding. The IEA believes this volatility is proof that Ghana needs stronger measures to keep inflation in check. With just a year to meet the 8% inflation target, the pressure is on.
The IEA insists that tackling inflation requires more than just raising interest rates or tightening monetary policy. The root causes, high food and energy prices and an unstable exchange rate, must be dealt with head-on.
The think tank reiterated that the government and BoG must prioritize stabilizing food and energy prices while keeping the cedi strong to avoid imported inflation.
