Inflation and investor uncertainty to weaken Ghanaian growth - Report

Amidst a relatively high debt load that triggered the financial crisis in Ghana, Fitch Solutions has projected that growth will slow down as the authority is confronted with a steep inflation record.

The economic crisis has weakened performance indicators in Ghana following authority default on debt repayments. Last year, the authority in Ghana ran to the International Monetary Fund, IMF, for a lifeline to overhaul economic activities and set the nation on a path to growth.

The multilateral lender granted the Ghanaian government $3 billion in funding support, requesting the government to restructure its debt profile. The authority then launched a debt exchange programme, stopping interest and principal payments on its government securities to local investors in the debt capital market.

Nigerian banks reported in a separate audited statement they recorded a loss on investment securities in the government of Ghana debt papers. Four tier-1 banks with subsidiaries in Ghana reported more than N240 billion naira equivalent due to participation in the debt exchange programme.

“We expect real GDP growth in Ghana to moderate to 2.9% in 2023, from an estimated 3.1% in 2022. We note that this remains well below the five-year pre-pandemic average of 5.3%, indicating that Ghana’s growth dynamics will remain weak over the coming quarters.

“We forecast that average annual inflation will rise to 35.1% in 2023, from 31.5% in 2022”, Fitch Solutions said in its monthly sub-Saharan Africa Monthly Outlook report sent to MarketForces Africa.

It said an ongoing uncertainty around the country’s external debt restructuring programme and IMF programme would weigh on the cedi, keeping inflation elevated by historical comparison.

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