The IMF World Economic Outlook (‘WEO’) report released in October 2023 provides updated data in respect of current and projected levels of inflation. The most significant changes from the updates provided in April 2023 relate to:

The IMF WEO report shows that entities with the currency of the following countries as their functional currency should apply IAS 29, ‘Financial Reporting in Hyper-inflationary Economies’, in 2023:

All economies that were hyper-inflationary in 2022 continue to be hyper-inflationary in 2023, apart from South Sudan which might no longer be hyper-inflationary in 2023. With the exception of 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. Ghana and Sierra Leone are considered to be hyper-inflationary economies from 31 December 2023.

The three-year cumulative inflation rate for Haiti reached 119% in January 2023. The WEO report issued in October 2023 shows that three-year cumulative inflation is expected to remain above 100% in 2023 and 2024, at 104% and 103% in December of each respective year. 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.

The WEO report shows that the projected three-year cumulative inflation will increase to 128% in 2023 and 133% in 2024. Local actual data (provided by the Ghana Statistical Service) supports this conclusion. Entities with the currency of Ghana as their functional currency should start applying IAS 29 for reporting periods ending on or after 31 December 2023.

The WEO report shows that the projected three-year cumulative inflation will increase to 123% in 2023 and 130% in 2024, supporting Sierra Leone being a hyper-inflationary economy at the end of 2023. Local actual data (provided by Statistics Sierra Leone) supports this conclusion. Entities with the currency of Sierra Leone as their functional currency should start applying IAS 29 for reporting periods ending on or after 31 December 2023.

The WEO report indicates that three-year cumulative inflation was 110% in 2022 and is expected to decrease to 76% in 2023 and 34% in 2024. However, due to a lack of reliable local data it is difficult to assess the exact point at which Yemen has fallen, or will fall, below the 100% threshold and should therefore no longer be subject to hyper-inflation. Based on the above, entities with the currency of Yemen as their functional currency should continue to apply IAS 29 for reporting periods ending 31 December 2023, but they should monitor the rates of inflation over the next year.

The WEO report issued in October 2023 shows that three-year cumulative inflation is expected to decrease significantly, to 30% in 2023 and 34% in 2024. It is therefore expected that entities with the currency of South Sudan as their functional currency will no longer be hyper-inflationary in 2023, and they should stop applying IAS 29 in December 2023. However, entities should consider any significant events or conditions that might contradict this conclusion between now and the end of 2023.

The following economies are not hyper-inflationary, but they should be kept under review in 2023 and 2024:

The WEO report issued in October 2023 shows that three-year cumulative inflation is expected to remain well below 100% during 2023. However, the projections indicate that three-year cumulative inflation will increase to 93% in 2024. 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 and 2024.

The WEO report issued in October 2023 shows that three-year cumulative inflation is expected to increase to between 72% and 83% for these economies during 2023, and to between 83% and 86% during 2024. Although the projections indicate that these countries are not expected to become hyper-inflationary in the next year, they continue to have high rates of inflation. Entities with the currency of Malawi, Nigeria and Pakistan as their functional currency should monitor developments of inflation during 2023 and 2024.

The WEO report, updated in October 2023, shows no reliable data available from this period onwards. However, local data provided by the Central Bank of Sri Lanka for Colombo CPI shows that the year-on-year inflation rates have significantly decreased during 2023, with an annual inflation rate of 1.3% in September 2023. Sri Lanka is not currently considered to be a hyper-inflationary economy, but entities with the currency of Sri Lanka as their functional currency should closely monitor developments of inflation during 2023 and 2024.

Consistent and reliable inflation data is not available for the following countries:

Entities with the currency of these countries should consider the information available at the reporting date to determine whether IAS 29 is applicable.

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.

For more information, please contact Gary Berchowitz or Beatriz Garcia Moreno.

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