Inflation in Ghana rose to a 21-year high in August as prices of imported goods continued to rise, helping the cedi to fall.

Annual import inflation accelerated to 35.2% from 33.9% a month earlier, ahead of domestic price growth for a fifth month, government statistician Samuel Kobina Anyim told reporters in the capital Accra on Wednesday.

The number of headlines rose for the 15th month in a row to 33.9% from 31.7% in July. This was the fastest pace since August 2001 and marked the 12th consecutive month that the inflation rate exceeded the top of the central bank’s target range of 6-10%. The average estimate of five economists in a Bloomberg survey was 35.1%.

The cedi has weakened by more than 39% against the dollar this year and is the second worst performing currency in the world after the Sri Lankan rupee. The depreciation prompted the central bank to hold a surprise meeting last month when it raised its key interest rate by 300 basis points to 22%, the biggest margin since at least 2002, bringing the total increase since November to 850 basis points.

The Bank of Ghana also announced measures to increase foreign reserves and support the cedi, adding to the fiscal steps taken by the government, including asking the International Monetary Fund in July for a $3 billion economic support program to restore investor confidence.

The inflation data is unlikely to convince the central bank to raise interest rates again when it announces its decision on September 26, unless the currency’s stabilization after the August hike is reversed. Key to its stabilization will be news of talks with the IMF, which could take place at the lender’s annual meeting in October, Simon Kihana-Evans, a London-based economist at Gemcorp Capital, said in an emailed comment.

Edem Kporku, Investment Research Analyst at Constant Capital Ghana Ltd. in Accra, and Courage Marty, an economist at asset management company IC Securities, expect inflation to peak in the final quarter.

The growth of prices for food products accelerated to 34.4% from 32.3% in July, inflation for non-food products – to 33.6% from 31.3%. Prices for the month increased by 1.9%.

The Ghana cedi traded relatively flat at 10.0686 per dollar at 10:11 a.m. in the capital Accra. The yield on Ghana’s dollar bond maturing in 2032 rose 49 basis points to 23.83%.

© 2022 Bloomberg

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