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Hyper-inflationary economies – Updated April 2023
What is the issue?
The IMF World Economic Outlook (‘WEO’) report released in April 2023 provides updated data in respect of current and projected levels of inflation. The most significant changes from the updates provided in October 2022 relate to:
- Haiti, which became hyper-inflationary in 31 March 2023; and
- Ghana and Sierra Leone, which are projected to become hyperinflationary during 2023. Entities with the functional currencies of Ghana and Sierra Leone should start to prepare to apply IAS 29, ‘Financial Reporting in Hyper-inflationary Economies’, in 2023.
What is the impact and for whom?
Hyper-inflationary economies
The IMF WEO report shows that entities with the currency of the following countries as their functional currency should apply IAS 29 in 2023:
- Argentina
- Ethiopia
- Haiti (new in 2023)
- Iran
- Lebanon1
- South Sudan
- Sudan
- Suriname
- Turkey
- Venezuela
- Yemen
- Zimbabwe
All economies that were hyper-inflationary in 2022 continue to be hyper-inflationary in 2023. With the exception of South Sudan and Yemen (see discussion below), the projected three-year cumulative inflation of these economies is expected to continue to exceed 100% during 2023.
In addition, Haiti was considered to be a hyper-inflationary economy from 31 March 2023.
Haiti
The IMF WEO report issued in April 2023 shows that three-year cumulative inflation is expected to exceed 100% in 2023. Based on the above, entities with the currency of Haiti as their functional currency should start applying IAS 29 for reporting periods ending on or after 31 March 2023.
South Sudan
The IMF WEO report issued in April 2023 shows that three-year cumulative inflation continued to exceed 100% at 31 December 2022 but is expected to decrease significantly below that threshold in 2023. South Sudan continues to remain a hyper-inflationary economy, but entities with the currency of South Sudan as their functional currency should closely monitor developments of inflation during 2023 to confirm whether it remains hyper-inflationary in 2023.
Yemen
The data included in the IMF WEO report issued in April 2023 was modified and shows that three-year cumulative inflation is below 100% in 2022. However, local data shows that three-year cumulative inflation exceeded 100% in 2022. Therefore, we continue to consider Yemen as hyper-inflationary. Entities with the currency of Yemen as their functional currency should closely monitor developments of inflation during 2023 to confirm whether it remains hyper-inflationary in 2023.
To be kept under review in 2023
The following economies are not hyper-inflationary, but they should be kept under review in 2023:
- Angola
- Egypt (new in 2023)
- Ghana
- Moldova
- Sierra Leone
- Sri Lanka
Angola and Moldova
IMF data shows that three-year cumulative inflation for these economies is 81% and 46% respectively in 2022. The projections indicate that three-year cumulative inflation will not exceed 62% for these economies in 2023.
Egypt
The IMF WEO report issued in April 2023 shows that three-year cumulative inflation is expected to remain well below 100% during 2023 and into 2024. However, the currency has devalued significantly and high rates of inflation prevailed in 2022 and into 2023. Entities with the currency of Egypt as their functional currency should monitor developments of inflation during 2023.
Ghana and Sierra Leone
The IMF WEO report issued in April 2023 shows that three-year cumulative inflation for Ghana and Sierra Leone is expected to increase to 125% and 110% respectively in 2023. Entities with the currency of Ghana or Sierra Leone as their functional currency are therefore expected to become hyper-inflationary during 2023.
Sri Lanka
IMF data shows that three-year cumulative inflation was below 100% in 2022, which was consistent with local data provided by the Central Bank of Sri Lanka for Colombo CPI and for National CPI. The IMF data projects the three-year cumulative inflation rate to be 103% in 2023; however, the rate of inflation is projected to decrease from 57% in 2022 to 15% in 2023. Based on the above and the qualitative factors in IAS 29, Sri Lanka is not currently considered to be a hyper-inflationary economy. Given that inflation remains high, entities with the currency of Sri Lanka as their functional currency should closely monitor developments of inflation during 2023.
Other potentially hyper-inflationary economies (lack of reliable information)
Consistent and reliable inflation data is not available for the following countries:
- Afghanistan
- Syrian Arab Republic
- Ukraine
Entities with the currency of these countries should consider the information available at the reporting date to determine whether IAS 29 is applicable.
When does it apply?
Paragraph 4 of IAS 29 states that it is preferable for all entities that report in the currency of a hyper-inflationary economy to apply the standard at the same date; and the standard should be applied as if the economy had always been hyper-inflationary.
1) Although inflation projections are no longer published by the IMF, the recent local actual data at December 2022 (provided by the Central Administration of Statistics, www.cas.gov.lb) shows that three-year cumulative inflation is significantly above 100% at 31 December 2022.
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Contact us
David Baur
Partner and Leader Corporate Reporting Services, PwC Switzerland
Tel: +41 58 792 26 54
