Ghanaian inflation may accelerate to near 10 percent after the government raised gasoline prices for the first time in a year to narrow its budget deficit, according to Databank Financial Services Ltd.
The inflation rate, which was unchanged in January at 8.8 percent from a month earlier, will probably be at least one percentage point higher in March because of the pump prices, Sampson Akligoh, head of research at Accra-based Databank, said by phone today. An expected revision in how the consumer-price index is measured may also push the figure higher, he said.
“A marginal increase in fuel prices will have a bigger impact on inflation with the upcoming new data series than we have for the existing data series,” Akligoh said.
Ghana, West Africa’s second-biggest economy, is cutting government subsidies on fuel as it tries to narrow the fiscal gap that reached 12.1 percent of gross domestic product last year, almost double a 6.7 percent target, according to the Bank of Ghana. Fitch Ratings cited the deficit’s “severe deterioration” when it lowered Ghana’s credit rating outlook to negative from stable on Feb. 15.
The domestic currency, the cedi, was Africa’s third-worst performer in 2012, falling 14 percent against the dollar, according to data compiled by Bloomberg. It weakened 0.2 percent to 1.9005 per dollar by 1:03 p.m. in Accra, paring its gain this year to 0.2 percent.
Gasoline prices were raised by 20 percent to 2.05 cedis ($1.08) a liter (0.26 gallon), the National Petroleum Authority said in an e-mailed statement today. The changes, including a 50 percent increase in liquefied petroleum gas used in cooking and higher costs for diesel and kerosene, took effect yesterday, it said.
Ghana spent about 1 billion cedis on fuel subsidies in 2012, the authority’s chief executive officer, Alexander Mould, said on Feb. 11.
The fuel-price adjustment will start having an effect on March inflation data because February’s measurements have already been taken, Ebo Duncan, a statistician with the Ghana Statistical Service, said by phone today. “Both food and non-food prices will be impacted,” he said.
Inflation may end 2013 in a range of 10 percent to 12 percent, Akligoh said in a note to clients today. The Bank of Ghana forecasts a year-end rate of 7 percent to 11 percent, it said on Feb. 13. That outlook may be revised when new index measures are announced, it said.