Hyperinflationary economies as at 31 December 2024
What is the issue?
The IMF World Economic Outlook (‘WEO’) report released on 22 October 2024 provides updated data in respect of current and projected levels of inflation. The most significant changes and updates compared to our In brief from April 2024 relate to:
- Lao P.D.R. and Malawi, which are expected to be hyperinflationary for 31 December 2024 period ends;
- Nigeria and Egypt, which are not considered hyperinflationary for 31 December 2024 period ends, but should be very closely monitored. These territories are at risk of becoming hyperinflationary and should be closely monitored;
- Zimbabwe which might no longer be considered to be a hyperinflationary economy from 31 December 2024; and
- Yemen, which is no longer considered to be a hyperinflationary economy from 30 June 2024.
What is the impact and for whom?
Hyperinflationary economies
Entities with the currency of the following countries as their functional currency should apply IAS 29, ‘Financial Reporting in Hyperinflationary Economies’, as at December 2024:
- Argentina;
- Ethiopia;
- Ghana;
- Haiti;
- Islamic Republic of Iran;
- Lao P.D.R. (updated from December 2024);
- Lebanon;
- Malawi (updated from December 2024);
- Sierra Leone;
- South Sudan;
- Sudan;
- Suriname;
- Turkey; and
- Venezuela.
The projected three-year cumulative inflation of the economies in the list above is expected to continue to exceed 100% during 2024. All economies that were hyperinflationary in 2023 continue to be hyperinflationary in 2024, apart from Yemen which is no longer hyperinflationary from June 2024.
Lao P.D.R. and Malawi are expected to be new hyperinflationary economies from 31 December 2024.
Lao P.D.R.
The WEO report issued in October 2024 shows that the projected three-year cumulative inflation will increase to 101% in 2024, supporting Lao P.D.R. being a hyperinflationary economy. Local data (provided by the Bank of the Lao P.D.R.) at September 2024 supports this conclusion. The WEO report also shows that the projected three-year cumulative inflation will decrease in 2025 to 99% and increase again in 2026 to 126%. Entities with the currency of Lao P.D.R. as their functional currency should start applying IAS 29 for reporting periods ending on or after 31 December 2024.
Malawi
The WEO report issued in October 2024 shows that the projected three-year cumulative inflation will increase to 106% by the end of 2024. Local September 2024 data (from the National Statistical Office in Malawi) also shows an actual three-year cumulative inflation well above 100%, with consistent year-on-year inflation up to September 2024 above 30%. The WEO report shows that the projected three-year cumulative inflation will decrease after 2024 and appears to indicate a sharp decrease in inflation over the remainder of 2024. However, the risk of high inflation remains elevated, mainly depending on the money supply and fiscal developments. We expect Malawi will be considered hyperinflationary at 31 December 2024 and entities using the Malawian Kwacha as their functional currency would therefore start applying IAS 29 for reporting periods ending on or after 31 December 2024. However, entities should consider any significant events or conditions between now and the end of 2024.
South Sudan
In the October 2023 release of the WEO report, it was anticipated that inflation in South Sudan would experience a substantial decline in 2023 and 2024 and our view at the time was that entities should consider significant events or conditions before ceasing application of IAS 29. There has been a significant change in the inflation data; the WEO report issued in April 2024 showed that three-year cumulative inflation was expected to increase significantly, and the WEO report issued in October 2024 shows that three-year cumulative inflation will increase to 368% in 2024 and 534% in 2025. Entities with the currency of South Sudan as their functional currency should therefore continue to apply IAS 29 at 31 December 2024.
Economies that might no longer be hyperinflationary
Zimbabwe
Zimbabwe was considered hyperinflationary as at June 2024. However, it has since transitioned to a new currency (ZWG) in April 2024. At this stage, there is insufficient data to conclude whether the change to the new currency has had the desired effect of reducing inflation to a level at which Zimbabwe would no longer be considered hyperinflationary. Entities that have ZWG as a functional currency, should monitor developments during the remainder of 2024 to conclude whether Zimbabwe is considered hyperinflationary for purposes of applying the ZWG as at 31 December 2024.
Economies that will no longer be hyperinflationary as at December 2024
Yemen
The WEO report issued in October 2024 indicates that three-year cumulative inflation was 44% in 2023 and is expected to decrease to 23% in 2024. The projected inflation will then increase again slightly in 2025, but well below a three-year cumulative amount of 100%. Based on the above, entities with the currency of Yemen as their functional currency should stop applying IAS 29 for reporting periods from 30 June 2024.
Economies that might cease to be hyperinflationary in 2025
Ethiopia
The WEO report issued in October 2024 shows that three-year cumulative inflation is expected to decrease significantly, from 133% in 2023 to 116% in 2024, and to 85% in 2025. Local data shows a decreasing year-on-year inflation trend. However, three-year cumulative inflation is still above 100%, and the other qualitative factors in paragraph 3 of IAS 29 are currently inconclusive to support this currency moving out of hyperinflationary status. Therefore, it is expected that entities with the currency of Ethiopia as their functional currency will still be hyperinflationary at 31 December 2024. Entities should monitor developments to consider whether the economy might cease to be considered hyperinflationary in 2025.
Ghana
The WEO report issued in October 2024 shows that three-year cumulative inflation is expected to be 118% in 2024. The expectation is that inflation will decrease significantly, to three-year cumulative inflation of 53% in 2025 and 34% in 2026. However, three-year cumulative inflation is still above 100% at 31 December 2024, and the other qualitative factors in paragraph 3 of IAS 29 are currently inconclusive to support this currency moving out of hyperinflationary status. Therefore, it is expected that entities with the currency of Ghana as their functional currency will still be hyperinflationary in 2024. Entities should monitor developments to consider whether the economy might cease to be considered hyperinflationary in 2025.
Economies to be very closely monitored in 2024 and 2025
The following economies are not hyperinflationary at this point but should be closely monitored at the end of 2024 and in 2025:
- Egypt; and
- Nigeria.
Egypt
The WEO report issued in October 2024 shows that projected three-year cumulative inflation will increase to 96% in 2024 and to 101% in 2025. Local data (provided by the Central Bank of Egypt) shows actual three-year cumulative inflation as at September 2024 around the 100% mark. The other qualitative indicators in paragraph 3 of IAS 29 are considered inconclusive. In addition, there are other fiscal and economic interventions currently expected to positively impact the economy. On balance our view is that Egypt will not be considered hyperinflationary at December 2024. However, entities should consider any significant events or conditions that might contradict this conclusion between now and the end of 2024. Entities with the currency of Egypt as their functional currency should closely monitor developments and, if the situation deteriorates, it is probable that this currency will become hyperinflationary sometime in 2025.
Nigeria
The WEO report issued in October 2024 shows that three-year cumulative inflation is expected to increase to 102% in 2024, and then to decrease to 101% in 2025 and 83% in 2026. Local data (provided by the Central Bank of Nigeria) shows actual three-year cumulative inflation as at August 2024 slightly above 100%. The other qualitative indicators in paragraph 3 of IAS 29 are considered inconclusive. In addition, there are other fiscal and economic interventions currently expected to positively impact the economy. On balance our view is that Nigeria will not be considered hyperinflationary at December 2024. However, entities should consider any significant events or conditions that might contradict this conclusion between now and the end of 2024. Entities with the currency of Nigeria as their functional currency should closely monitor developments and if the situation deteriorates, it is probable this currency will become hype-inflationary sometime in 2025.
Economies to be kept under review in 2024 and 2025
The following economies are not hyperinflationary, but they should be kept under review in 2024 and 2025:
- Angola (updated from December 2024);
- Burundi;
- Myanmar (updated from December 2024);
- Pakistan; and
- Sri Lanka.
Angola
The WEO report issued in October 2024, shows that three-year cumulative inflation is expected to increase to 75% in 2024 (83% in 2025). Although the projections indicate that Angola is not expected to become hyperinflationary in the next year, it continues to have high rates of inflation. Entities with the currency of Angola as their functional currency should monitor developments of inflation during 2024 and 2025.
Burundi
The WEO report issued in October 2024 shows that three-year cumulative inflation is expected to increase to 83% in 2024 (86% in 2025). Although the projections indicate that Burundi is not expected to become hyperinflationary in the next year, it continues to have high rates of inflation. Entities with the currency of Burundi as their functional currency should monitor developments of inflation during 2024 and 2025.
Myanmar
The WEO report issued in October 2024 shows that three-year cumulative inflation is expected to increase to 97% in 2024 but decrease again to 68% in 2025. Although the projections indicate that Myanmar is not expected to become hyperinflationary in the next year, it continues to have high rates of inflation. Entities with the currency of Myanmar as their functional currency should monitor developments of inflation during 2024 and 2025.
Pakistan
The WEO report issued in October 2024 shows that three-year cumulative inflation is expected to increase to 77% in 2024 (61% in 2025). Although the projections indicate that Pakistan is not expected to become hyperinflationary in the next year, it continues to have high rates of inflation. Entities with the currency of Pakistan as their functional currency should monitor developments of inflation during 2024 and 2025.
Sri Lanka
The WEO report issued in October 2024, shows no reliable data available from 2023 onwards. However, local data provided by the Central Bank of Sri Lanka for Colombo CPI shows that the year-on-year inflation rates significantly decreased during 2023 and remain stable during 2024. Sri Lanka is not currently considered to be a hyperinflationary economy, but entities with the currency of Sri Lanka as their functional currency should monitor developments of inflation during 2024 and 2025.
Other potentially hyperinflationary economies (lack of reliable information)
Consistent and reliable inflation data is not available for the following countries:
- Afghanistan;
- Eritrea; and
- Syria;
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 hyperinflationary economy to apply the standard at the same date; and the standard should be applied as if the economy had always been hyperinflationary.
