Goldman Sachs expects further 150bps hike for Ghana in Q1'23

Ghana is currently facing significant economic challenges, with inflation reaching about 40% and the currency being one of the worst performing in the world. Economists at Goldman Sachs expect further monetary policy rate hikes in the first quarter of 2023, totaling a cumulative increase of 29%. John Gatsi, the Dean of the University of Cape Coast School of Business, joined CNBC Africa to discuss the current situation in Ghana and the possible road to recovery. Gatsi highlighted the feeling of uncertainty among business owners and the general public, with concerns about eroding capital and lack of confidence in investments. One of the key issues contributing to the economic challenges in Ghana is the heavy reliance on imports for essential food items, such as tomatoes and rice. Gatsi emphasized the need for policy corrections that would promote local production and reduce dependency on imports. He pointed out that past programs have incentivized importation over production, leading to a decline in domestic agriculture and industry. To address these fundamental issues, Gatsi believes Ghana must refocus its policies to support local production and revamp the agricultural sector. The looming IMF deal expected in the first quarter of next year offers hope for the Ghanaian economy, with the potential for regained confidence and policy alignment once the agreement is in place. However, Gatsi warned of the immediate challenges facing Ghana, including the threat of default and the need for debt restructuring to address the growing financial pressures. The Bank of Ghana's ongoing efforts to raise the monetary policy rate reflect the urgency of managing inflation and stabilizing the economy. With the impending VAT increase likely to further impact inflation, Gatsi anticipates further rate hikes in the near future. Despite the economic difficulties facing Ghana, Gatsi also touched on the recent success of the Black Stars, the national football team, noting that while there is excitement during their games, the focus quickly shifts away afterward. The interview highlighted the complex economic landscape in Ghana and the critical steps needed to address the current challenges and pave the way for sustainable recovery. As the country navigates uncertain economic terrain, stakeholders will be closely watching for developments in policy, debt restructuring, and external support to stabilize the situation and set the stage for future growth.