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Sub-Saharan Africa suffers from rising inflation



Inflation has been spiking around the world: compared to last year's 4.71%, worldwide inflation for 2022 is predicted to be almost 7.5%. Across sub-Saharan Africa, this has put pressure on buckling systems, and some of them are starting to crack.

Ghana serves as a solid example of this in action. The country has been struggling ever since its inception, with inflation only being under 10% for three of the last forty years. This problem skyrocketed in 2022 with the value of Ghana's currency, the cedi, in free fall, threatening almost all local businesses. The Ghanaian cedi has dropped by almost 60% against the US dollar since the start of the year. Since January, the cedi has rapidly depreciated against the US dollar, making it the world’s second-worst performing currency.


But it isn't the only country suffering from these issues: a similar situation is playing out in Ethiopia, Nigeria, and many other countries. As a result, central banks across the sub-Saharan region have raised their policy rates. The primary opponent of many governments is the number of imported goods coming into the country. For example, Ghana imports almost $3.5 billion worth of merchandise, including more than $600 million in food alone. As one of our partners, Alexandre Carneiro, noted, “Importers, distributors, and wholesalers mark their imported stocks in USD (excusing on funding stocks on foreign loans), thus forcing immediate market “price increase” to recover ‘stocks value’… Therefore USD inflow is a must for the economy, hence the need of central banks to act as soon as possible on interest rates and release some ‘USD securities’ to ‘calm down’ the market”.


Noting this, some countries are working to renegotiate trade agreements or form new ones to alleviate the burden these imports place on their economies. For example, Djibouti recently signed a trade agreement with Egypt that will allow for a greater supply of food, bringing down prices. By a similar coin, other countries are working to boost the internal production of food and materials to reduce the number of imported goods. However, inflation continues to rise despite all these efforts, forcing many governments to take out loans to keep themselves above water.


Although governments around the world are taking action against inflation, it still runs rampant in even countries that have it relatively controlled. It may take years for many countries, especially in sub-Saharan Africa, to recover, as it has decimated local businesses, exacerbated distrust in public systems, and saddled many countries with large loans to repay.



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