Ghana’s remarkable success in bringing inflation down from the crisis-era highs of 2022 and 2023, to a mere 3.4 percent as at April this year is facing its most serious test yet as a combination of international geopolitical tensions and domestic cost pressures begin feeding through the economy.
The latest blow came over the weekend when the Ghana Private Road Transport Union (GPRTU) and allied transport operators announced a 20 percent increase in public transport fares effective June 2, citing rising fuel prices, spare parts costs and vehicle maintenance expenses.
The fare increase is widely expected to trigger second-round inflationary effects across the economy, increasing the cost of moving people, goods and agricultural produce.
Transport operators argue that the adjustment has become unavoidable. The Chamber of Petroleum Consumers (COPEC) has also defended the increase, with Executive Secretary Duncan Amoah noting that rising fuel prices have significantly increased operating costs for transport providers.
Middle East crisis emerging as key inflation driver
At the heart of the new inflation risks is the continuing geopolitical crisis in the Persian Gulf and broader Middle East region, which has disrupted global energy markets and pushed up international crude oil prices.
Ghana, as a net importer of refined petroleum products, remains highly vulnerable to such external shocks. Higher global oil prices are already being reflected in domestic fuel prices, despite the relative strength of the cedi against major international currencies.
“The biggest risk to Ghana’s inflation outlook at the moment is imported inflation from energy markets,” has observed economist and policy analyst Joe Jackson, who is the CEO of Dalex Finance.
The concern extends beyond transport costs. Energy analysts warn that rising fuel costs could soon be reflected in electricity tariffs.
Electricity tariffs under pressure
Although the Public Utilities Regulatory Commission (PURC) reduced electricity tariffs by an average of 4.81 percent for the second quarter of 2026, the regulator’s tariff adjustment formula explicitly takes account of fuel costs used in thermal power generation.
Given that nearly four-fifths of Ghana’s electricity generation comes from thermal sources, any sustained increase in international fuel prices could significantly increase generation costs and place upward pressure on tariffs during the next quarterly review.
Energy sector consultant Benjamin Nsiah, the Director of the Centre for Environmental Management and Sustainable Energy, argues that “higher fuel import costs inevitably affect the cost structure of electricity generation, and consumers may ultimately bear part of that burden if the trend persists.”
For manufacturers, mining companies and service providers, higher electricity tariffs would raise production costs, potentially resulting in higher consumer prices.
Food inflation risks are also growing
Another emerging concern is the impact of Middle East supply disruptions on global fertilizer markets.
Industry players report growing concerns over fertilizer availability and pricing, particularly for products sourced from or dependent on feed stocks originating in the Middle East.
“If fertilizer costs rise significantly, farmers will either reduce application rates or pass the additional costs onto consumers through higher food prices,” development economist Peter Quartey, – who is the Director of the Institute of Statistical, Social and Economic Research of the University of Ghana – has warned.
Food inflation has historically been one of the most important drivers of overall inflation in Ghana because food accounts for a large share of household expenditure.
Market traders in Accra’s major food markets are already expressing concern.
“We are worried because transport is going up and farmers are talking about higher input costs. Eventually the prices of vegetables, maize and other staples will increase,” said trader Ama Mensah at the Agbogbloshie market.
Consumers share similar concerns.
“Even though inflation numbers have come down, many people still feel prices are high. Another increase in transport and food prices will make life more difficult,” said office worker Kwame Asante.
Government and Bank of Ghana respond
The authorities are not standing still though.
The Bank of Ghana’s Monetary Policy Committee recently maintained the policy rate at 14% while simultaneously tightening liquidity conditions through the introduction of a dynamic 20% cash reserve ratio for banks. The central bank says the move is intended to support exchange-rate stability and help contain inflationary pressures.
Central bank Governor, Dr Johnson Pandit Asiama has repeatedly emphasized the importance of preserving macroeconomic stability and preventing imported inflation from becoming entrenched in domestic prices.
The government is also relying on fiscal discipline under its IMF-supported economic programme to sustain confidence in the economy and maintain exchange-rate stability, which remains a critical buffer against imported inflation. Although Ghana has formally exited the three year programme and therefore will no longer receive financial support it has signed up to a Policy Coordination Instrument (PCI) which allows the IMF to influence policy decision making.
Analysts note that the recent appreciation and relative stability of the cedi has already helped cushion some of the impact of rising global commodity prices.
“The exchange rate is currently acting as Ghana’s first line of defence against imported inflation,” said economist Dr Theo Acheampong who is now a Technical Advisor to the Ministry of Finance. “Without the cedi’s strength, fuel and food prices could have risen much faster.”
Moderate inflation rebound likely
Most economists believe inflation is likely to trend upward modestly over the coming months after reaching historically low levels earlier this year.
However, they do not expect a return to the severe inflationary conditions experienced during Ghana’s debt crisis.
The key determinants will be the duration of the Middle East conflict, the trajectory of international oil prices, fertilizer supply conditions and the continued stability of the cedi.
Should geopolitical tensions ease and oil prices retreat, the current inflation pressures could prove temporary. Conversely, a prolonged crisis could force further fuel price increases, additional transport fare adjustments and higher utility tariffs.
For now, businesses are being advised to prepare for higher operating costs, while households may need to adjust budgets as transport, food and utility expenses edge upward.
“The inflation battle has largely been won,” according to one Accra-based treasury dealer. “The challenge now is preventing these external shocks from reversing the gains. Ghana’s fundamentals are much stronger than they were three years ago, but the global environment has suddenly become much more complicated.”
By: Toma Imirhe / businesspostonline
