Ghana’s sharp reduction in inflation in 2025 ranks among the most dramatic disinflation regimes in recorded economic history, the World Bank has said.
The assessment is contained in the World Bank’s 10th Ghana Economic Update, which highlights a significant improvement in Ghana’s borrowing environment following the rapid moderation in inflation.
The report notes that as inflationary pressures eased, the Bank of Ghana progressively reduced its monetary policy rate, creating conditions for interest rates across the financial system to decline.
According to the World Bank, Ghana’s disinflation in 2025 was particularly pronounced.
Headline inflation fell from 23.2% in February 2025 to 5.4% by December, the lowest level since 1999.
The sharp decline was supported by tight monetary policy, a 28.9% appreciation of the cedi, and easing food prices.
The disinflationary trend continued into 2026, with inflation reaching a low of 3.2% in March before rising to 5.3% in June.
The World Bank attributes the subsequent increase partly to higher food and energy import costs.
The report points to supply constraints arising from higher energy and fertilizer costs, alongside climate-related disruptions to production.
The conflict in the Middle East also contributed to a sharp increase in fuel pump prices, raising operating costs for transport operators, manufacturers and agro-processors.
These pressures prompted the authorities to introduce a temporary fuel price relief measure to cushion consumers and businesses.
The developments highlight the vulnerability of Ghana’s inflation gains to external shocks, even after the substantial improvement recorded in 2025.
1,400 basis-point rate cut
The dramatic fall in inflation gave the Bank of Ghana room to ease monetary policy significantly.
The policy rate was progressively reduced from 28% in April 2025 to 14% by March 2026 and was subsequently maintained at 14% through July.
That represents a cumulative 1,400-basis-point reduction.
The easing has also fed through to the cost of borrowing.
Average lending rates fell from approximately 27% in June 2025 to 15.6% in June 2026, significantly improving the financing environment for businesses and households.
The World Bank’s assessment suggests that the gains in price stability have extended beyond the inflation numbers, with a marked improvement in financial conditions.
However, the recent increase in inflation indicates that the disinflation process remains vulnerable to food, energy and other supply-side pressures.
The key challenge for policymakers will therefore be to preserve the hard-won stability while supporting economic activity through a more favourable interest-rate environment.
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