Ghana's Rising Prices: Uncovering the Truth Behind the CPI
Ghana is seeing a slowdown in inflation, but many Ghanaians are yet to feel a reduction in the cost of living. While the Ghana Statistical Service reports declining year-on-year inflation, market prices remain stubbornly high, leaving households struggling. The key to understanding this disconnect lies in the cumulative nature of the Consumer Price Index (CPI).
The CPI doesn’t track price drops; it measures how much prices have increased over time, using 2021 as its base year (indexed at 100). This means that even as the rate of inflation slows, the previously accumulated high prices don’t simply vanish. The CPI acts like a ladder – each rise establishes a new base for future increases.
A reduction in inflation from 54% to 18%, for example, doesn’t mean a loaf of bread that cost GH₵8 will return to that price after reaching GH₵20. It signifies the price may now increase at a slower rate, perhaps from GH₵20 to GH₵21.60, rather than jumping to GH₵30. “Inflation slowing is about the rate of increase easing, not prices reversing,” explains Ernestina Mensah, a Market Risk Specialist and Economic Policy Analyst.
Ghana’s consistently high accumulated CPI is a result of years of structural price pressures. Currency depreciation, global supply chain issues, rising commodity prices, and tax adjustments have all contributed to the persistent high cost of goods and services. The country’s heavy reliance on imports means the exchange rate directly impacts inflation. When the cedi depreciates, importers pay more for goods, and these costs are inevitably passed on to consumers.
This creates a frustrating situation where policymakers celebrate declining inflation rates, while citizens don’t see corresponding reductions in market prices. The data isn’t incorrect, but the interpretation often misses the crucial context. Prices have reached a higher level and are simply increasing at a slower pace.
Unlike economies with robust supply chains and domestic production, Ghana lacks the mechanisms to naturally drive prices down. High post-harvest losses, logistical inefficiencies, and energy costs all contribute to maintaining elevated price levels. Businesses are unlikely to sell below replacement cost, especially with a volatile exchange rate.
The Bank of Ghana’s recent foreign exchange interventions aim to address some of these structural issues, but the effects will take time to materialize. Even with inflation now within the Bank of Ghana’s target band, the legacy of past price increases continues to impact consumers.
Ghana’s inflation story highlights the importance of “economic memory” – prices don’t forget past increases. To truly alleviate the burden on Ghanaian households, the country must address the underlying structural issues that drive up production and distribution costs. “The truth behind Ghana’s accumulated CPI is that inflation may be slowing, but its legacy persists,” Mensah asserts.
Even rebasing the CPI in 2026 won’t erase the accumulated price levels. Rebasing simply changes the reference point, not the economic reality. The high prices will remain the foundation for future price changes. Therefore, the effects of past inflation will continue to be felt, regardless of the new base year.
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