Ghana’s 27% electricity tariff hikes begins today

Ghana's Public Utilities Regulatory Commission has approved a significant 27 percent electricity tariff hike that has come into effect today. This decision comes as the price of petrol at the pumps is also set to increase by between 5 and 10 percent. The country's economy is in focus as these changes are expected to have wide-ranging implications. Courage Boti, an economist at GCB Capital, shared insights on the potential impact of these developments. The tariff increases have been a long time coming, with the review process starting some time back and culminating in the recent decision. The approved increments of 27 percent and 21 percent are seen as compromises, considering utility sector players had requested much higher increases, some even up to 130 percent. These tariff hikes are expected to contribute to the already elevated inflation levels in the country. The risk of further inflationary pressures looms large, with the impact of the hikes likely to be felt in the market in the coming months. However, it is believed that Ghana may be approaching a peak in inflation, although challenges remain, such as potential impacts from external factors like the recent stabilization of the exchange rate. In terms of petrol prices, the planned increase is viewed as a reflection of the current exchange rate situation. Despite expectations of lower prices at the pumps following recent market changes, the currency has been under pressure, leading to the current price levels. The combination of these factors is anticipated to contribute to higher inflation levels, although it is suggested that consumers may be able to sustain their coping strategies until a peak is reached. The recent interventions to stabilize the exchange rate, including significant inflows of foreign exchange, are seen as positive developments that could help in stabilizing the situation and eventually lead to a decrease in inflation. While consumers may need to tighten their belts in the short term, there is optimism that these measures could lead to a more favorable economic outlook in the future. When it comes to policy responses, it is noted that there may not be much room for further interventions in the near future. The recent policy actions, including interest rate cuts and cash reserve ratio increments, are expected to have an impact in the coming months and could help mitigate inflationary pressures. As a result, it is unlikely that there will be additional policy measures taken in the remainder of the year, with a focus on allowing the existing interventions to take effect and address the current economic challenges.