Russia-Ukraine war to force Ghana to tighten domestic monetary conditions
The United Nations Conference on Trade and Development (UNCTAD) has said the ongoing Russia-Ukraine war is likely to force Ghana and other developing countries to tighten domestic monetary conditions.
UNCTAD in a rapid assessment report on the impact of the ongoing war on trade and development across the globe, averred the rise in food and fuel prices stemming from the war is accelerating inflation in many countries, particularly developing and least-developed countries.
According to UNCTAD, higher inflation raises the pressure on Central Banks to tighten monetary policy by increasing interest rates.
Adding that heightened uncertainty and volatility as caused by the ongoing war will result in a shift of wealth of financial investors from assets such as emerging market debt instruments that are perceived to be high risk, to safe havens such as government debt instruments of advanced economies which may exacerbate pressures on exchange rates of developing countries.
Ghana’s inflation rate at end-February 2022 jumped to 15.7% from 13.9% in the previous month – January 2022.
Over the past few weeks, prices of fuel at the pumps have been on the rise due to the persistent increase in the price of crude oil on the international market as a result of the Russia-Ukraine war.
Read: Producer Price Inflation continues upward trend; hits 21.4% at end-February 2022
Food prices, also as an adverse impact of the ongoing war has seen increments over the past weeks.
On the back of the increments in fuel and food prices, inflation for the month of March is expected to inch above the 15.7% inflation recorded in February.
In view of that, it is also anticipated that the Bank of Ghana will raise its policy rate to counter the country’s rising inflation.
UNCTAD’s rapid assessment of the impact of the war in Ukraine on trade and development, and interrelated issues in the areas of finance, technology, investment and sustainable development has confirmed a rapidly worsening outlook for the world economy, underpinned by rising food, fuel and fertilizer prices, heightened financial
volatility, sustainable development divestment, complex global supply chain reconfigurations and mounting trade costs.
This rapidly evolving situation is alarming for developing countries, and especially for African and least developed countries, some of which are particularly exposed to the war in Ukraine and its effect on trade costs, commodity prices and financial markets.
