The Governor of the Bank of Ghana (BoG), Dr Ernest Addison, has expressed optimism that private sector credit will pick up as the signs of an economic rebound are positive after the ravages caused by the COVID-19 pandemic.
According to Dr Addison, the policies introduced in the throes of the pandemic to control its effect on business have begun yielding positive returns.
The Bank of Ghana, in view of the pandemic, among other things complemented the government’s COVID-19 relief measures with a raft of policy and regulatory measures to loosen financing conditions, ease liquidity pressures, and keep the supply of credit to support critical sectors of the economy.
In particular, the bank reduced its policy rate by 150 basis points to 14.5%; and reduced the primary reserve requirements and the capital conservation buffer for regulated financial institutions.
In collaboration with other stakeholders, the BoG also announced a reduction in the cost of mobile money transactions and purchased a 10-year Government of Ghana COVID-19 bond with a face value of GHC10 billion to augment the government’s financing requirements.
Speaking at the Ghana Chamber of Commerce and Industries Business Forum, Dr Addison said: “We have also seen the gains from these policies introduced to contain effects of the pandemic – the Ghanaian economy has performed far better than its peers, and economic activity is rebounding faster than we observe with our peers; with the Bank of Ghana’s Composite Index of Economic Activity showing a 26.8% year-on-year growth in March 2021.
“The IHS Market Ghana Purchasers Managers Index, which gauges the rate of inventory accumulation by managers of private sector firms and measures dynamics in economic activity, also improved to 52 in April 2021 from 51.7 in March,” he said.
Dr Addison noted that amid the pandemic inflation rose sharply from single digits and peaked at 11.4% in July 2020. Inflation has now declined from double digits to 7.5% in May 2021 – back to pre-COVID-19 levels and within the medium-term target band of 8 plus and minus 2%.
He added that average bank 7-day lending rates have trended down from a high of 26.2% in December 2017 to 20.9% in May 2021. At the May MPC meetings, the Policy Rate was lowered by 100 basis points to 13.5% on account of muted risks to the inflation outlook.
The lower policy rate is expected to trigger further downward adjustments in interest rates more broadly. “Despite some weakening in export receipts due to lower crude oil production, and a smaller balance of payments surplus, the cedi has remained relatively stable during the first half of the year.
“Cumulatively, the Ghana Cedi appreciated by 0.2% against the US dollar in the year to May 2021, compared with a depreciation of 1.3% in the same period of 2020. The country’s Gross International Reserves reached US$11.3billion at the end of May 2021, providing cover for 5.2 months of imports of goods and services compared with a stock position of US$8.6billion (equivalent to 4.1 months of import cover) at the end of December 2020.”
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