Stagflation Returns: The Ticking Time Bomb Under Ghana's Cedi

The simultaneous existence of high inflation and stagnant economic growth — stagflation — is the economist's ultimate nightmare because the policy tools for fighting each condition directly worsen the other. Raising interest rates to fight inflation kills growth. Cutting rates to stimulate growth fans inflation. The world last faced this trap during the 1979 oil shock. It is back.

Ghana's macroeconomic position places it at extreme risk. The country simultaneously manages a domestic inflation rate still well above target; monetary policy locked by IMF conditionalities; collapsing global growth compressing commodity income; and a fuel price shock that remains structurally unresolved despite this week's brief relief. A cedi depreciation spiral, triggered by stagflationary investor flight, would compound every one of these pressures simultaneously.