Deloitte says the projected decline in inflation by the end of 2025 can be achieved if the government can follow through with the various measures designed and intended to be deployed for addressing the issue of high inflation.
In particular, Deloitte said, the Agriculture for Transformation Agenda promises to address key inefficiencies along various food value chains, thereby spurring production and taming food inflation, which has been the main driver of the high inflationary pressures we have faced.
“We further recommend that government considers the impact of emerging geo-political risks in Europe, America and Russia and the potential trade wars that may result from these and, to the extent feasible, put in measures to address any excesses from these geo-political risks that may impact adversely on our pricing developments,” the professional services firm said in its analysis of the 2025 budget statement.
It added “Whilst we acknowledge the various policy interventions intended to mitigate our FX risks (i.e. streamlining gold sales through the GoldBod, intensifying forward FX auction, reducing public spending and budget deficit, and prioritizing import substitution), we have identified the declining cocoa production as a major issue that must be addressed to also help in boosting our forex reserves and reducing the FX demand pressure.
“Overall, we expect the slowdown in depreciation in recent times to continue for the rest of the year primarily due to the expected inflows of forex from the IMF programme and the World Bank Development Policy Operation (DPO) funding.”
Headline inflation increased marginally from 23.2% as at the end of 2023 to 23.8% in December 2024. The upward trend in inflation in 2024 was largely driven by a spike in food inflation over the period. The end of year inflation in 2024 exceeded the budget target of 15% and the IMF central target of 18%.
The 2025 Inflation target is projected to end the year at 11.9% relative to inflation of 23.8% reported at the end of December 2024.
Government’s plans to curb inflation include the following: Implementing an Agriculture for Economic Transformation Agenda that aims to increase food production and reduce food inflation; Targeting large ticket items in the inflation basket such as transportation and utilities; and Leveraging an appropriate monetary stance to support disinflation process.
