The 1st Deputy Governor of the Bank of Ghana (BoG) Dr. Maxwell Opoku-Afari has said Ghana’s response to the COVID-19 pandemic has been decisive and broadbased, with both the fiscal and monetary authorities implementing complementary measures to tackle the effects of the pandemic.
The response, he said, was in many respects, similar to the policies implemented elsewhere in the world.
Government in particular, he added adopted a “whatever it takes” stance to minimize the impact of the pandemic, culminating in some GHc21 billion Covid-19-related expenditure in 2020.
Speaking at the Journalists for Business Advocacy (JBA) financial literacy training workshop on Friday July 9, Dr Opoku-Afari said to complement the fiscal policy actions, the Bank of Ghana deployed various tools.
These are “the interest rate tool, macroprudential policies, market liquidity support, and the triggered its emergency financing clause to purchase a Government COVID-19 Bond.
“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.”
He added “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.”
By Laud Nartey|3news.com|Ghana