Economist Dr. Theo Acheampong warns that exchange rate volatilities could derail the government’s ambitious end-of-year inflation target of 15 percent.
Reviewing the revised macro-targets in the mid-year budget review, Dr. Acheampong expressed confidence in the country’s potential to achieve the upgraded Overall Real GDP Growth rate, now set at 3.1 percent.
However, he cautioned that the inflation target might be challenging to meet.
Ghana’s inflation eased to 22.8% in June 2024, up from 23.2 the previous month driven by fuel, utilities and food.
The Ghanaian cedi has depreciated by 21% against the US dollar in 2024, driven by a lower current account surplus due to increased import demand, a sharp decline in cocoa exports and energy sector payments, in addition to speculative activity.
Dr. Acheampong pointed out that duties and taxes on goods imported into the country are normally index in dollars, a situation that unnecessarily increases prices of goods.
“Most of the charges on the ICUMS platform are charged in dollars. This means that when the cedi depreciates, importers will pay more at the ports”.
This, he argued the situation will always impact on prices of goods, leading to inflation.
“The importers will not bear that cost and will pass on the extra cost at the ports to consumers. This means consumers will pay more”, he said.
He maintained that these factors could derail the gains made in reducing inflation, ultimately causing the government to miss its target.
Revised macro targets
The government has announced some key revisions to the country’s macroeconomic fiscal targets for 2024.
Presenting the mid-year budget in parliament on July 23, 2024, Finance Minister, Mohamed Amin Adam said the Overall Real GDP Growth rate has been revised upwards from 2.8 percent to 3.1 percent.
He stated that the government has decided to maintain the end-of-year inflation target unchanged at 15 percent.
Dr. Amin Adam said that Primary Balance on a Commitment basis has also been maintained at a surplus of 0.5 percent; while Gross International Reserves (including oil funds and encumbered/pledged assets) are expected to cover not less than 3.0 months of imports.