A fracturing world

When the Minister for Finance presented the 2026 Budget in November 2025, the message was confident: fiscal discipline restored, inflation tamed, the cedi stabilised, and investor confidence rekindled. The Government’s mission was clear—move from recovery to shared prosperity on the back of a “firm foundation” for growth.

That foundation is now being tested by a familiar kind of shock.

In our earlier review of the 2026 Budget, we flagged a key vulnerability: Ghana’s exposure to commodity price and volume volatility, particularly in crude oil. As a price taker with declining domestic production, Ghana’s revenue and capital spending plans were always at the mercy of global markets.

The ongoing conflict involving Iran, Israel and the United States—and the resulting blockade of the Strait of Hormuz, a critical artery for global oil flows—is now turning that abstract risk into a live threat. Brent crude briefly approached USD120/bbl in March 2026 before easing, only to climb back to around USD110/bbl as hostilities dragged on. Energy markets remain on edge.

For Ghana, this threatens the Budget’s most important strategic priority: consolidating macroeconomic stability—single-digit inflation, adequate reserves, and a primary surplus.

The pattern is uncomfortably familiar. Just four years ago, Russia’s invasion of Ukraine disrupted energy markets and global supply chains. Ghana paid a heavy price: record inflation, a weakening cedi, surging debt, default on sovereign obligations, and ultimately a USD3bn IMF programme and debt restructuring.

Despite an impressive macroeconomic recovery in 2025, the structure of Ghana’s economy has not changed enough to cushion it from external shocks. The Strait of Hormuz choke therefore risks unwinding many of the hard-won gains of the last almost 15 months.

Two factors will shape the depth of the impact: how long the conflict and blockade last, and how quickly and decisively policy responds. While Ghana cannot influence events in the Gulf, it can control its policy pivots.

In the short term, a prolonged disruption is likely to produce a stagflationary mix—higher inflation and slower real GDP growth—against Budget assumptions of 6–10% period-end inflation and 4.8% growth.

The transmission channels are clear:

• Fuel and transport costs: As a net importer of petroleum products, Ghana is directly exposed to higher world prices. More expensive petroleum imports push up ex-pump prices, which feed into transport fares, freight charges and logistics costs. The National Petroleum Authority (NPA) has already announced price floor increases of 10–26%, with more likely if the Gulf situation worsens. These costs will ripple across the economy, squeezing business margins and household incomes and risking a reversal of the 13-month disinflation streak.
• Trade and supply chains: Beyond fuel, several import and export flows rely on Gulf shipping routes, including petrochemical feedstocks, aluminium cans, chemical oxidants and non-traditional exports such as frozen fish, fruits and nuts. A protracted choke could cut trade volumes to a trickle for some of these goods, disrupting production and jobs and threatening fiscal and macro targets.
• Food and agriculture: Diesel-intensive agriculture and agro-processing will feel the pain from higher pump prices. More expensive haulage will quickly translate into higher food prices. Any disruption to global fertiliser supply chains will compound the problem, risking lower yields for staples such as maize and rice, weaker food security and pressure on cocoa-related export revenues.
• Power and manufacturing: With around two-thirds of electricity generation coming from thermal sources, sustained petroleum price increases will raise fuel costs for IPPs, driving pressure for higher tariffs. In a more severe scenario, reduced petroleum import volumes could trigger renewed “dumsor”. Manufacturers will face higher power and imported input costs, discouraging investment and potentially further weakening a sector that grew by only 2.3% in 2025, according to the 2026 Budget.
• Financial services: Banks and insurers are likely to reassess exposures to energy-intensive and energy-linked sectors. Tighter credit conditions and higher risk premiums would weaken loan demand and weigh on real-sector activity. If risks are not properly quantified and priced, the financial system could face higher non-performing loans and capital strain.

Heading into the shock, Ghana’s macro indicators looked encouraging. Inflation had fallen to 3.3% in February 2026 (from 23.1% a year earlier), and the Monetary Policy Committee (MPC) felt confident enough to cut the policy rate by 150 basis points to 14% in March. The cedi is supported by a USD3.7bn trade surplus and USD14.5bn in reserves (5.8 months of import cover), and the 2026 Budget targeted a primary surplus of 1.5% of GDP.

The Strait of Hormuz shock complicates this picture:

• Inflation: The latest CPI data does not yet reflect the full impact of higher oil prices. Without targeted policy measures to block or soften inflation transmission channels, the next prints could show disinflation stalling or reversing, with upside risks if fuel prices continue to climb.
• Interest rates: While the MPC cited robust domestic resilience and high real rates to justify its March cut, persistent geopolitical tension may force a rethink at its next meeting. A return to tightening would push up reference and lending rates, raising the cost of borrowing for firms and households.
• Currency stability: Rising import bills—for fuel, goods and logistics—will increase FX demand. Despite strong reserves, early market indicators suggest the cedi has already come under pressure against major currencies. If the conflict drags on, the Bank of Ghana (BoG) may need to step up interventions to manage volatility and protect currency credibility.
• Fiscal consolidation: Elevated oil prices create a revenue windfall relative to Budget assumptions, governed by the revised Petroleum Revenue Management Act (Act 1138), which ring-fences spending on infrastructure. The direct risk to fiscal consolidation is therefore manageable—provided compliance holds. The greater danger lies in indirect pressures if inflation breaches the 8% ± 2% target band, the cedi weakens sharply, or interest rates rise again, pushing up spending and complicating revenue mobilisation.

In this fluid environment, the effectiveness of Ghana’s response will be judged on speed, coherence and credibility. Key short-term policy pivots include:

• Targeted fuel tax relief: carefully calibrated, temporary reviews of taxes, levies and regulatory margins on fuel—triggered by clear price thresholds and reversed when prices fall—could soften the blow to businesses and households. Any such move must balance near-term relief with long-term fiscal needs and be well communicated.
• Monetary prudence: the MPC can use the policy rate to anchor inflation expectations and signal seriousness about preserving recent gains. In the current context of elevated oil prices and higher pump prices, a more cautious stance—even a pause in easing—could be warranted until risks become clearer.
• Targeted liquidity and credit support: rather than broad stimulus, BoG could work with banks to provide targeted working capital and liquidity support to sectors directly hit by first-round effects of the oil shock, while strengthening oversight to protect asset quality.
• Active FX management: with strong reserves as a buffer, BoG should focus on smoothing excessive cedi volatility and maintaining confidence, even as import bills rise.

For businesses, the choice is clear: adapt or absorb the shock.

Tactically, firms should:

• Redesign pricing models, shortening review cycles and, where legally possible, indexing to transparent cost drivers such as fuel or FX, while pruning low-margin products.
• Reconfigure cost structures, shifting fixed costs to variable where possible, re-sourcing within ECOWAS or under AfCFTA, and exploring energy efficiency or substitution.
• Tighten working capital, accelerating receivables, renegotiating payables and increasing inventory turnover to preserve cash.
• Hedge currency exposure, naturally (by matching FX revenues and costs) and financially where feasible, while reducing FX-denominated liabilities or lengthening their tenors.
• Revisit borrowing and investment plans, locking in fixed-rate funding where appropriate and prioritising short-payback projects over long-gestation expansions funded by debt.

At the same time, businesses should avoid speculative FX bets, debt-fuelled expansion, long-term fixed-price contracts without escalation clauses, and holding large, imported inventories unhedged.

Finally, this is a moving target. Corporate leaders should establish routines for monitoring:

• International signals: diplomatic tone shifts; naval advisories; IEA/OPEC announcements; commodity and FX market volatility; and sanctions and payment system restrictions.
• Domestic signals: BoG decisions on the policy rate and liquidity; movements in government security yields; NPA petroleum price floor adjustments; and Ministry of Finance actions on fuel taxes, social transfers, and spending priorities.

Ghana’s macro reset has created valuable breathing room. Whether that room is used to manage this shock or is lost to another cycle of crisis will depend on the decisiveness of policy—and the agility of businesses to plan, adapt and respond in real time.