“Coupled with the lingering effects of the COVID-19 pandemic, this is adding to higher oil and food prices,” RMB said in its report on the effect of the war on African economies.

RMB is the corporate and investment banking arm of FirstRand Bank Limited – of which First National Bank Ghana is a division.

RMB said significant price increases and supply-side challenges had been the norm in the various African economies since the beginning of the war, indicating that the prices of wheat and other cereal had risen sharply since the beginning of the war.

“With the expectation of higher inflation, businesses have already increased their prices for goods and services,” the report said.

RMB also asserted that the massive disruptions over the past two years due to the pandemic resulted in business input costs increasing by 10 per cent to 15 per cent.

“Further input costs should be expected this year as the global economy has not re-opened fully. China is still restricting movement as a result of the pandemic and the war is affecting trade in Europe,” RMB said.

It said growth estimates for this year were shrouded by severe global risks, such as the Russia-Ukraine war, higher global interest rates, and tepid demand given the latent effects of the pandemic.

On the local economy, RMB said fiscal risks, FX liquidity challenges and higher inflation costs were envisaged to affect the pace of the country’s growth.

Thus, the Bank of Ghana opted to hike the main policy rate by 2.5 per cent from 14.5 to 17 per cent in March 2022, in an attempt to arrest inflation.

Commenting on the report, RMB Economist for Sub-Saharan Africa, Mr Daniel Kavishe said “Marginal Propensity to Consume (MPC) has seemingly opted to frontload its hiking cycle as opposed to taking a staggered approach.”

“Global economic developments, particularly the ongoing war in Eastern Europe and its effect on global growth and inflation, and the 25 bases points  increase in the US  federal  funds rate, served as key economic factors that supported the committee’s decision,” he said  Kavishe. 

The Minister of Finance recently announced key fiscal changes in view of Ghana’s current fiscal and economic challenges and changes were introduced in both revenue and expenditure that would have a material effect on the budget.

“We contend that while government will make strict cuts in certain areas, key line items such as grants to other government units, interest payments and compensation of employees will remain sticky. Capital expenditure, on the other hand, is likely the area where expenditure can be rationalised as has been seen in other governments in periods where expenditure growth needs to be curtailed,” stated Mr Kavishe.

He observed that  “Total revenue and grants are likely to improve by 37.0 per cent relative to 2021, versus government’s assumption of 48.0 per cent year-on-year and this implies full year figures of GH¢93 billion  versus government’s estimates of GH¢100.5 billion.”