The central bank, through its COVID-19 interventions in the financial sector, injected more than GH¢4billion into the economy – which contributed to prevention of an economic recession the Governor, Dr. Ernest Addison, has said.
With the country faced with a serious threat of economic recession that had the potential of eroding all the gains achieved by government in the past three years, Dr. Addison noted that the pandemic pushed the central bank to come up with prudent economic support interventions which have sustained the economy till date.
Speaking at the 2020 Annual Bankers’ Dinner organised by the Chartered Institute of Bankers (CIB) Ghana, Dr. Addison said: “After three years of prudently managing the Ghanaian economy, we ended the year 2019 with a significant consolidation of fiscal policy, a decline in the rate of inflation, robust build-up of international reserves in the central bank, and stability in the exchange rate.
“Then came the beginning of 2020 and the Ghanaian economy was hit with an external shock – the COVID-19 pandemic which has impacted negatively on global trade, commodity prices, tourism and international capital flows.
“But the combination of measures to deal with the prevailing threat at the time not only translated into a relief of more than GH¢4 billion to the economy, but also multiplier effects strong enough to provide the necessary impulse required to contain threats of recession and support economic recovery efforts post COVID-19,” he said.
He explained that government’s decision to do ‘whatever it takes’ to minimise impact of the pandemic on citizens – including a stimulus package of over GH¢11.2billion to address the social and economic consequences – was a major step in the right direction which then brought everyone along, including the central bank.
To complement fiscal policy actions, the Bank of Ghana, he noted, deployed its various tools – namely interest rate, macro-prudential policies, market liquidity support – and triggered its emergency financing clause to purchase a Government COVID-19 Bond.
Specifically, in the heat of the pandemic the Bank of Ghana reduced the Monetary Policy Rate by 150 basis points to 14.5 percent to complement fiscal policy and provide support to economic growth; and the Cash Reserve Requirement (CRR) ratio for banks was lowered from 10 to 8 percent to provide additional liquidity to banks. This policy measure freed-up additional resources of about GH¢2billion for banks and SDIs to lend to critical sectors of the economy.
The CRR for Rural and Community Banks, Savings and Loan Companies and Finance Houses was reduced from 8 to 6 percent; and from 10 to 8 percent for microfinance companies; The Capital Conservation Buffer was reduced by 1.5 percentage points to 11.5 percent – providing capital relief of about GH¢1.1billion for banks.
The provisioning requirements for loans categories was reduced from 10 to 5 percent, which translates to about GH¢115.3million in capital relief to banks; restrictions were imposed on dividend and other capital distributions for the financial years 2019 and 2020 to preserve liquidity and capital buffers; and the deadline for new capital requirement for SDIs (MFIs and RCBs) was extended to December 2021, to provide temporary relief.
The Bank of Ghana also requested banks to grant a 3-12 months’ moratorium on principal payments on loans granted to customers in the worst pandemic-hit sectors; and a reduction in mobile money charges and waiver of transaction fees on minimum transactions and increased wallet limits was agreed with telcos to promote electronic transactions.
