The Bank of Ghana policy measures employed to minimize the impact of the COVID-19translated into a relief of more than GH¢4.0 billion into the economy.

This according to the Governor of the Bank of Ghana provided the necessary strong multiplier effects required to contain threats of recession and support economic recovery efforts post-COVID-19.

Dr. Ernest Addison revealed this in a speech delivered at the 2020 Annual Dinner of the Chartered Institute of Bankers on November 28, 2020.

The various tools deployed by the Bank of Ghana include interest rate tool, macro-prudential policies, market liquidity support, and triggered its emergency financing clause to purchase a Government COVID-19 Bond.

This, according to the Governor, was to complement the fiscal policy actions taken by the government through its spending patterns to cushion the economy.

He pointed out that to minimize the impact of the Pandemic on citizens a stimulus package of over GHc11.2 billion was made available by the government to address the social and economic consequences.

Speaking on the specific policy interventions, he pointed out that the reduction in the Monetary Policy Rate by 150 basis points to 14.5 percent complement fiscal policy and provide support for 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 SDIs to lend to critical sectors of the economy”.

Dr. Addison further stated that the Bank of Ghana, unlike other peer central banks, was able to utilize its emergency clause of the BoG Act to allow the Bank Purchase Government of Ghana COVID-19 relief bond to the tune of GH¢10 billion, in line with provisions of the BOG Act 2002 (Act 612), as amended Act 918.

 “It should be known that over the last three years, the Bank had observed a strict zero financing of the budget in line with a Memorandum of Understanding between it and the Ministry of Finance as part of the IMF program”.

He noted that this policy represented a major policy shift reflecting the posture of doing “whatever it takes” to preserve lives and livelihoods.  This, he said, “helped in closing the widened financing gap of the budget arising from increased COVID-related spending as revenues dwindled”.

He praised the banking industry for the positive response to the central bank’s monetary policy actions and regulatory relief measures.

“Following the announcement of the measures, Banks have provided various reliefs to customers through a reduction in lending rates, granted moratoria on loan repayments, restructured existing facilities, and advanced new loans to customers.

“Broadly, these actions have helped moderate the economic impact of COVID-19 on customers and minimized the potential disruptions in credit flows. There is no doubt that these responses have contributed significantly to the much faster pace of economic recovery than anticipated”.

Dr. Addison noted that the macro outlook is generally positive with supportive global conditions, easing domestic inflation, and improving growth prospects.

However, he cautioned that the evolution of the budget deficit and the financing needs to support budget implementation and the uncertainty surrounding the pandemic pose risks to the positive economic outlook.

Speaking on the outlook of the banking sector, he noted that the economic impact of the pandemic may result in higher non-performing loans and some capital erosion of banks.

He, however, assured that the Bank of Ghana is putting greater focus on identifying the early warning signals and initiating prompt corrective action.

“The symptoms of a weaker bank are usually poor asset quality, lack of profitability, loss of capital, excessive leverage, excessive risk exposure, poor conduct, and liquidity concerns”, he said.

These symptoms, he noted, could occur due to an economic downturn but are often caused by inappropriate business models, poor governance, poor decision making by senior management, and misalignment of internal incentive structures with external stakeholder interests.