Rising tide
Ghana's inflation rose to 23.8% in December 2024, driven by food prices, while the energy sector debt surged to $3 billion.
Ghana's consumer inflation rose to 23.8% in December 2024, up from 23.0% in November, driven by higher food prices, with food inflation reaching 27.8%. Non-food inflation slightly decreased to 20.3%, while locally produced and imported item inflation rose to 26.4% and 17.9%, respectively. Meanwhile, Ghana’s energy sector debt has surged to $3 billion, according to Energy Minister-designate John Jinapor, who attributed it to poor management and rising interest on existing debt. Jinapor outlined plans for a six-month framework to involve the private sector in the Electricity Company of Ghana’s operations to improve efficiency and power distribution.
Ghana's inflation challenge is deeply structural, with the Ghana Statistical Service attributing the current surge to rising food prices and escalating transport and fuel costs. These essential sectors have compounded the burden on households, eroding disposable incomes and amplifying economic hardship. Despite these pressures, the International Monetary Fund (IMF) projects that Ghana could achieve single-digit inflation of 8% by the end of the year. This optimistic outlook comes after inflation fell from a peak of 54% in December 2022.
However, the impact of high prices remains severe, with households spending over 80% of their income on food, leaving little room for other essentials. Meanwhile, about 34% of the population lives below the poverty line, highlighting the stark economic disparity.
Beyond inflation, Ghana is grappling with an impending energy crisis. The energy sector faces a staggering debt burden, with the country requiring approximately $1.25 billion to procure fuel for independent power producers. These producers account for more than 50% of Ghana's electricity generation capacity, making their financial stability critical to averting a full-blown energy crisis. Under the current IMF programme, Ghana has been tasked with implementing a new Energy Sector Recovery Programme. This initiative aims to address the sector's debt challenges, streamline procurement processes, and ensure sustainable energy generation. Successfully executing this plan will be pivotal in reducing the country's fiscal vulnerabilities and stabilising the power sector.