Inflation pressures hit different countries in 2024 with their respective central banks adopting various monetary policies tailored to country-specific fiscal concerns.
African nations experiencing moderate inflation, such as Kenya, South Africa, Rwanda, and Mozambique, have implemented interest rate reductions, taking into account stable inflation expectations within their designated target ranges.
Conversely, countries grappling with high inflation, including Egypt, Nigeria, and Angola, have responded with interest rate increases alongside reforms aimed at monetary and exchange rate stabilization to mitigate volatility.
In East Africa, Burundi reports the highest inflation rate at 12%, followed by Kenya at 11.25%, Uganda at 9.75%, Ethiopia at 7%, Rwanda at 6.5%, and Tanzania at 6%. The Central Bank of Kenya executed three significant reductions in the benchmark interest rate, concluding 2024 at 11.25%, down from a peak of 13% in February.
The Kenyan economy experienced a slowdown in the latter part of 2024, prompting the Central Bank’s dovish stance, with expectations of ongoing stability for the shilling and a rebound in economic activity. Inflation has decreased from a peak of 6.9% in January and is now within the central bank’s target range.
The South African Reserve Bank reduced its key interest rate by 100 basis points in 2024, bringing it down to 7.75%. This adjustment coincided with a decline in inflation to manageable levels, as the Rand remained stable.
In Egypt, interest rates were raised by 8% in 2024, reaching 27.25% in December, up from 19.25% in January. The inflation rate decreased to 25.5% in November, surpassing the central bank’s target, largely due to rising prices for fuel and cigarettes.
In late September, the Reserve Bank of Zimbabwe implemented a significant devaluation of the Zimbabwean Dollar (ZiG) by 43%, adjusting its value from 13.56 to 24.4 against the US dollar in an effort to stabilize the country’s unstable economy.
In 2024, Angola’s central bank increased its benchmark interest rate by 200 basis points, concluding the year at 19.50%, marking the highest rate since 2022. Despite a slight easing, inflation in Angola remained high, with the latest figures indicating a decrease to 28.41% as the Kwanza showed signs of recovery.
The Bank of Ghana (BOG) made a minor reduction to its interest rate in September, maintaining it at 27% in November to combat persistent inflation and alleviate pressure on the exchange rate. Ghana’s inflation rate rose to 23% in November, primarily due to increasing food prices.
The Ghanaian Cedi faced significant pressure in 2024, influenced by investor concerns regarding the ongoing debt restructuring and reduced foreign exchange earnings from cocoa, of which Ghana is the world’s second-largest producer.
In November, Zambia’s central bank raised its benchmark interest rate to 14%, the highest level since 2017, in a bid to control inflationary pressures and support the Kwacha. Inflation accelerated to 16.5% in November, driven by the severe impacts of prolonged drought, which contributed to the depreciation of the Zambian Kwacha against the dollar.
Nigeria’s Central Bank raised its benchmark interest rate for the sixth consecutive time this year to 27.5%, aiming to mitigate persistent inflation and stabilize the Naira in anticipation of increased demand for dollars. In November, inflation in Nigeria surged to 34.6%, largely due to rising food prices.
As we approach the new year, African countries must explore other ways of tackling inflation asides the monetary policy strategy used largely in 2024.
