Fitch has said it expects inflation to peak in the third quarter of 2022 before slowing through the end of the year.
“We forecast annual average inflation of 22% in 2022, slowing to 16% in 2023,” Fitch said.
The national year-on-year inflation rate was 31.7% in July 2022 which is 1.9 percentage points higher than the recorded 29.8% in June 2022, the Ghana Statistical Service (GSS) has said.
The rating agency has also downgraded Ghana’s Long-Term Foreign-Currency (LTFC) Issuer Default Rating (IDR) to ‘CCC’ from ‘B-‘.
According to Fitch, the downgrade reflects the deterioration of Ghana’s public finances, which has contributed to a prolonged lack of access to Eurobond markets, in turn leading to a significant decline in external liquidity. In the absence of new external financing sources, international reserves will fall close to two months of current external payments (debits in the current account) by the end of 2022.
The BoG’s Monetary Policy Committee (MPC) has raised the main policy rate twice in 2022, by a total of 450bp to 19%.
Fitch believes that the central bank would raise the policy rate again if inflation does not peak in line with current expectations.
“A higher policy rate would likely be transmitted to domestic yields, putting further pressure on the government’s domestic borrowing costs,” the rating agency said.