THE Bank of Ghana (BoG) Governor, Dr Ernest Addison, has assured the country that the central bank will partner the government to roll out robust and credible policies to mitigate the impact of the novel Coronavirus (COVID-19) on lives and the economy.
Speaking to the Graphic Business in a special interview broadcast live on Facebook today, Thursday, Dr Addison said in spite of the devastating nature of the pandemic, BoG and the Ministry of Finance were determined to ensure that the virus did not push the economy back on the path of unsustenability.
The Governor noted that the viral spread had threatened to undo the gains that the bank and the government had chalked up since 2017 by causing inflation to resume an upward trajectory and threatening to expand the fiscal deficit, among other risks.
In spite of the credible threat that the pandemic posed to the economy, the Governor said the measures introduced by the central bank and the government was adequate, for now, and would help to protect the economy from slipping back to the period when growth and debt and fiscal deficit were at unsustainable levels.
He was speaking to the Editor of the Graphic Business, Mr Theophilus Yartey, in the latest edition of the Graphic Talks360, a novelty by the Graphic Communications Group Limited to get key stakeholders to discuss pertinent issues of national interest.
Dr Addison said although the impact of the pandemic was still unfolding, some challenges were emerging, citing the fall in revenue at a time when public spending was expanding.
“This really complicates policy and it calls for very serious navigation in order to ensure that we do not derail the gains that we have made over the past three years,” he said.
The Governor, however, assured the public that the measures introduced by the central bank were yielding the necessary results, adding that the bank was confident that inflation, which had drifted from its target band to 11.3 per cent in May, would revert to the single digit by the end of the year.
Dr Addison said BoG’s decision to lower its policy rate from 16 per cent to 14.5 per cent in March had proven to be timely, having resulted in an increase in commercial lending to businesses and households.
“The COVID-19 pandemic is an economic shock; an economic shock which impacts on aggregate demand – there is no much activity by way of demand in the economy.
“By lowering the policy rate, you are able to stimulate a little bit of demand because the interest rate of investments goes down,” he said.
He said following the reduction in the policy rate, banks had reduced their lending rates by about 200 basis points, leading to increased demands for credit.
According to Dr Addison, BoG’s directive to banks to give their loan customers moratorium in servicing their debt had benefited more than 3,000 customers.
He also mentioned the reduction in the reserve requirement ratio of the central bank for banks from 10 per cent to eight per cent as another key policy intervention that had helped to mitigate the impact of the pandemic on lives and the economy.
“This translates into about GH¢2 billion of money which the banks are free to use to augment the lending that they are providing to the private sector.”
“I think that has also helped,” he said.
He said the bank had also directed banks not to pay dividends this year as a strategy for them to accumulate capital buffers and strengthen their resilience to be able to fight the pandemic adequately.
The virtual interview, dubbed ‘Time with the Governor,’ was a novelty of the Graphic Business, the country’s most authoritative business and financial newspapers, for Dr Addison, who is also the Chairman of BoG’s Monetary Policy Committee (MPC) to provide insights into the banking sector’s operations in the first half of the year and the central bank’s response strategy on the COVID-19.
The programme is part of a special programme dubbed ‘Graphic Talks360,’ an initiative of the Graphic Communications Group Limited (GCGL), publishers of the Graphic Business, the Daily Graphic and five other news platforms, to discuss for key personalities to discuss topical issues.
Source: Daily Graphic
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