Inflation at the crossroads: Ghana’s big test in 2025

By Prof. Samuel Lartey

sammylaatey@yahoo.com

Introduction

For years, Ghanaian households and businesses have lived under the weight of high inflation, with prices of food, fuel, and services eroding incomes and confidence. At its peak in early 2023, inflation soared past 50%, making life unbearably expensive for many. Fast forward to 2025, and the picture looks strikingly different: inflation has fallen to 11.5% by August, the lowest in four years.

Encouraged by this progress, the Bank of Ghana (BoG) is boldly projecting that inflation will reach single digits by the end of 2025. This promise has brought hope to many, but it also raises an important question: is this truly within reach, or another fleeting illusion in Ghana’s long struggle with price stability?

Ghana’s First Nine Months under the Mahama Administration

Since assuming office on January 7, 2025, President John Dramani Mahama has presided over a surprisingly swift turnaround in the economy. Within nine months, several key indicators suggest stability is returning:

            •           Inflation: Fell from 23.5% in January to 11.5% in August 2025.

            •           Policy Rates: The BoG reduced its benchmark rate from 30% at the end of 2024 to 21.5% by September 2025 as inflation cooled.

            •           Economic Growth: GDP grew 6.3% in Q2 2025, driven by agriculture and services.

            •           Currency & External Position: The cedi strengthened by ~21% YTD, supported by a US$6.2 billion trade surplus and reserves of US$10.7 billion.

            •           Fiscal Consolidation: A primary surplus of 1.1% of GDP was achieved by mid-year, surpassing IMF program expectations.

This strong backdrop is the foundation for BoG’s optimism about achieving single-digit inflation.

Reality or Illusion?

Why Reality Looks Possible

            •           Disinflation momentum is strong, with prices falling consistently for nine months.

            •           Fiscal and monetary policies are aligned, with the government delivering surpluses while the BoG maintains discipline.

            •           Robust reserves and exports give the economy a cushion against external pressures.

Why Illusion Still Lurks

            •           Utility tariff hikes could raise costs and push inflation back up.

            •           Climate shocks could disrupt food supplies, a major driver of inflation.

            •           Currency pressures could re-emerge if global commodity prices shift or capital inflows weaken.

On balance, the trajectory favors reality but the risk of backsliding remains.

What Single-Digit Inflation Would Mean

            •           Government: Lower debt servicing costs, more fiscal space for infrastructure and social programs.

            •           Businesses: Cheaper borrowing, more predictable pricing, and confidence to expand.

            •           Households: Stronger purchasing power, stable food and fuel costs, and improved living standards.

Conclusion

Ghana stands at a critical juncture. Inflation has already been halved in less than a year, giving credibility to the BoG’s forecast. If the current path holds, single-digit inflation by end-2025 iswithin reach. The prize is enormous: cheaper credit for businesses, relief for households, and stronger fiscal stability for government.

But this victory will not come automatically. One misstep, such as sudden utility price hikes, food shortages, or renewed pressure on the cedi, could quickly derail progress. Achieving single-digit inflation is not just about technical numbers; it is about restoring economic confidence and ensuring that every Ghanaian feels the benefits.

In 2025, Ghana’s inflation story will either be remembered as a milestone of resilience or as another missed opportunity. The outcome depends on how firmly the nation holds its course.