Currencies

World Bank warns Ghana, others against widening credit spreads, weakened currencies

The World Bank is warning Ghana and some African countries against the widening credit spreads and weakened currencies.

In its June 2022 Global Economic Prospects report, the Bretton Wood institution, also said the tightening of monetary policy to combat rising inflation has also gathered pace in several Sub-Saharan African economies including Ghana, Namibia, Nigeria, Rwanda, Sierra Leone and South Africa.

Moreover, the rising core inflation in several countries (Cameroon, Nigeria, Uganda) points to broadening price pressures, further reducing room for accommodative policies.  

“Sovereign credit spreads have already widened and currencies weakened in countries perceived to be at high risk of debt distress (Ghana)”, it futher explained.

“Fiscal policy, already constrained by high public debt and tightening global financial conditions, have become even less accommodative. Spending pressures to curb the impact of rising prices have been building in many countries, for example, fuel subsidies in Cameroon, Kenya, and Nigeria; a fuel levy reduction in South Africa, further straining fiscal positions.”, the World Bank stated.

The World Bank also pointed out that the tightening of monetary policy to combat rising inflation has also gathered pace in several Sub-Saharan African economies  such as Ghana, Namibia, Nigeria, Rwanda, Sierra Leone and South Africa.

Moreover, the rising core inflation in several countries (Cameroon, Nigeria, Uganda) points to broadening price pressures, further reducing room for accommodative policies.

Ghana’s economy to expand by 5.5% in 2022

Meanwhile, the World Bank has affirmed Ghana’s Gross Domestic Product (GDP) growth rate of 5.5% in 2022.

Also, growth in Sub-Saharan Africa is projected to decelerate from 4.2% in 2021 to 3.7% in 2022, as high inflation and policy tightening weaken domestic demand.

The growth deceleration in major trading partners is however compounding these headwinds.

Growth is projected to firm slightly to an average of 3.9% in 2023-24, assuming further progress with pandemic containment, favorable terms of trade in commodity exporters, and a gradual easing of global food price pressures.

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