Ghana is set to exceed the International Monetary Fund's (IMF) target for year-on-year inflation in 2023, according to IC Research.
The November 2023 inflation figure of 26.4% aligns with the IMF program's Monetary Policy Consultation Clause, falling between the 27.4% inner band and the 25.4% outer band of the lower limit.
IC Research predicts that Ghana will outperform the IMF's end-2023 central target of 29.4%, leaning toward the outer band of the lower limit.
The research firm's updated Consumer Price Index (CPI) forecast for December 2023 indicates the potential to outperform even the outer band of 25.4%, projecting a landing zone of 24.2%.
IC Research notes that during the November 2023 Monetary Policy Committee (MPC) meeting, the Bank of Ghana unified the cash reserve requirement for all bank deposits held in cedi-equivalent, effectively raising the cash reserve ratio to 15.0%.
“Our impact assessment revealed that this monetary decision has effectively mopped up ¢4.6 billion from the interbank market as banks' holding of Bank of Ghana bills declined to ¢28.1 billion as of December 13, 2023 (versus ¢32.6bn pre-Monetary Policy Committee),” stated IC Research.
The research firm highlighted the upward reversal in yields across treasury bills after the monetary squeeze, cautioning that the Treasury's reliance on T-bills for financing the 2023 and 2024 budget deficit poses an upside risk to yields.
However, it anticipates that sharp disinflation could alleviate the pressure and potentially revive a modest downside risk for yields.
