Ghana targets 15% inflation rate in 2024

Ghana's President, Nana Akufo-Addo, is hopeful that the country will maintain its current inflation slowdown, aiming for a 15 per cent target for next year. Despite this positive outlook, Ghana's sovereign dollar bonds have seen a decline after the government presented debt restructuring scenarios involving potential haircuts of 30-40 per cent for bondholders. John Gatsi, Dean at the University of Cape Coast School of Business, joined CNBC Africa to delve into the terms and expectations surrounding Ghana's debt restructuring program. Gatsi highlighted concerns about the down trend in inflation not being reflective of lowering costs and prices, pointing to the impact of factors such as fuel prices and depreciation. Regarding the government's optimism about the 15 per cent inflation target, Gatsi acknowledged that while achievable, external factors could still influence the outcome. He emphasized the need for sustained trends and cautioned about potential triggers like fuel price fluctuations and currency depreciation. Shifting focus to the debt restructuring, Gatsi examined the proposed terms for bondholders, expressing skepticism about their readiness to accept significant haircuts. He noted that investor evaluation of options based on their interests would be pivotal in reaching an agreement, as negotiation and compromise are crucial elements in such scenarios. The ongoing discussions with commercial creditor groups and bilateral lenders under the G20 common framework indicate an understanding of the shared burden between creditors and borrowers. Ghana's commitment to reducing its debt to 55% of GDP by 2028 from the current 109% is central to the country's fiscal reforms supported by the IMF's $3 billion bailout program. Gatsi stressed the importance of growth momentum in managing the debt-to-GDP ratio effectively, cautioning against undue pressure that could hamper economic productivity and stability. He highlighted the need for gradual steps and prudent debt management to achieve long-term sustainability. In conclusion, Ghana's economic landscape reflects a mix of optimism and challenges as the government navigates inflation targets, debt restructuring discussions, and fiscal reforms. The balancing act between meeting targets, engaging creditors, and maintaining economic stability underscores the complexity of managing the country's finances in the coming years.