‘Exchange rate, economic recovery, & election-year spending key drivers of Ghana’s inflation’

Economist Leslie Dwight Mensah of the Institute for Fiscal Studies (IFS) has identified three major factors behind Ghana’s persistent inflation, which he says is a lingering effect of the country’s recent economic crisis.

Mensah first pointed to the cedi’s ongoing depreciation as a significant contributor to inflation, describing the currency’s steady decline as unprecedented since the 1990s. “For three consecutive years, the cedi has depreciated annually by almost 30%,” he said. This sustained depreciation, he noted, has intensified inflation, as evidenced by October’s high month-on-month inflation rates—particularly in non-food sectors, where inflation surpassed 1%, compared to 0.3% in food.

The second factor, according to Mensah, is Ghana’s gradual economic recovery, which, while positive, has spurred a rise in prices. “Economic activity has picked up as we recover from the crisis, and this growth has influenced inflation as well,” he explained, noting that higher economic activity often stimulates demand, which can exert upward pressure on prices.

Mensah also highlighted election-year spending as a third factor, with both public and private expenditure increasing during this period. He observed that “election years typically see a ramp-up in spending, especially in the latter half,” which injects more liquidity into the economy and, in turn, drives prices higher.

According to Mensah, these three dynamics—the currency depreciation, recovery-led price pressures, and increased election-year spending—together underscore the inflationary pressures facing Ghana.