BoG lauds Ghana’s response to Covid-19 Pandemic

The Bank of Ghana (BoG) has lauded efforts introduced by the country in response to novel coronavirus pandemic (Covid-19). According to the 1st Deputy Governor of the BoG, Dr. Maxwell Opoku-Afari Ghana’s “has been decisive and broadbased” with both the fiscal and monetary authorities implementing complementary measures.

He noted that the policy response was similar to that of many other policies implemented in other jurisdictions across the world.

He lauded the Government in particular for adopting what he described as a “whatever it takes” attitude which according to him has contributed largely to reducing the impact of the pandemic on the country.

He made the remarks on Friday July 9, 2021 when he opened a financial literacy training workshop of the Journalists for Business Advocacy (JBA) at Prampram in Accra.

According to Dr Opoku-Afari the fiscal policy actions adopted by the government complemented the BoG’s deployed tools. He mentioned the tools to include “the interest rate tool, macroprudential policies, market liquidity support, which triggered the BoG’s emergency financing clause to purchase a Government COVID-19 Bond.

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“Specifically, the Bank of Ghana introduced the following policy and regulatory interventions: The Monetary Policy Rate was reduced by 150 basis points in March 2020 and another 100 basis points in May 2021 to 13.5 percent to complement fiscal policy and provide support to economic growth; The cash reserve requirement (CRR) ratio for banks was lowered from 10 to 8 percent to provide additional liquidity to Banks. This policy measure was expected to free up additional resources of about GHS2 billion for banks and Specialised Deposit-Taking Institutions (SDIs) to lend to critical sectors of the economy; The CRR for Rural and Community Banks (RCBs), Savings and Loans Companies (S&Ls), 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 and providing capital relief of about GHS1.1 billion for banks;

“The provisioning requirements for loans categories was reduced from 10 to 5 percent and which translates to about GHS115.3 million 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; The deadline for new capital requirement for SDIs (MFIs and RCBs) was extended to December to provide temporary relief to SDIs, given current economic conditions;

“The Bank of Ghana requested Banks to grant 3-12 months moratorium on principal payments on loans granted to customers in the worst pandemic-hit sectors; A reduction in mobile money charges and waiver of transaction fees on minimum transactions (GHS100) and increased wallet limits was agreed with the TELCOS to promote electronic transactions as part of COVID protocols.

“Moreover, to help close the residual financing gap of the budget arising from increased COVID-related spending and to prevent an inefficient tightening of domestic financial conditions arising from market conditions, the Bank of Ghana utilised its policy space from gains of over three years of strong monetary policy reforms, by triggering the emergency clause of the BOG Act to allow the Bank purchase Government of Ghana COVID-19 relief bond (GH¢10 billion), in line with provisions of the BOG Act 2002 (Act 612), as amended Act 918.”

According to him “In addition, following the announcement of the measures by the Bank of Ghana, Deposit Money Banks also provided various reliefs to customers through reduction in lending rates, granted moratoria on loan repayments, restructured existing facilities, and advanced new loans to customers. Broadly, these actions have helped to moderate the economic impact of COVID-19 on customers and minimised the potential disruptions in credit flows.

“Importantly, these reliefs occurred in the context of a reformed banking sector. The banking sector remains liquid, profitable, and well capitalised. The Financial Soundness Indicators are strong and Banking Sector Stability Index monitored by the Bank remains in high positive territories indicating the resilience of the sector. A recent BOG survey on the impact of the pandemic on Banks showed that while the pandemic has increased the industry’s cost of operations, banks have not passed on the associated costs to consumers through higher interest margins.”