As the economic and financial impact of the Covid-19 hits other sectors of the economies, central banks across the world are taking the driver’s seat in efforts aimed at curbing the impacts of the pandemic on businesses and the economies in general. Many took the route of cutting interest rates following the example of the United States Federal Reserve Board while others reduce other forms of bank charges on different financial services and special purpose vehicles.
The Bank of Ghana (BoG) which earlier in the week removed charges on money transfers below 100 Ghanaian cedis have announced the cutting of interest rates, making it the first central bank in Sub-Saharan Africa to do so. Sources at the apex bank say that the decision to cut interest rates is in response to the coronavirus pandemic, reducing its benchmark to an eight-year low. The monetary policy rate was reduced to 14.5% from 16%, the first cut since January 2019. The Monetary Policy Committee was originally scheduled to announce its decision on March 23 but to quell market anxiety; it made the decision public today. Growth in gross domestic product could decline to 5% and could even slow to 2.5% in a worst-case scenario, said the central bank. The International Monetary Fund’s most recent growth forecast for Ghana was 5.6%.
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Dampened global demand could significantly weigh on earnings from crude, while export restrictions from advanced economies and emerging markets may create supply-chain shortages for Ghanaian businesses, said the central bank. This is expected to have “severe consequences” for economic growth and tax revenue that could become more severe by the third quarter. “These assessments are preliminary as the situation is very fluid and the degree of uncertainty concerning the outbreak is very high,” the central bank said. “This means that there is a likelihood that these assessments could change rapidly.” Ghana is also requesting support from the World Bank and the International Monetary Fund to mitigate against the economic impact of the pandemic, Finance Minister Ken Ofori-Atta said Inflation, which measured 7.8% in February, is expected to remain within the target band of 6% to 10% for the next quarter, it said.
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Central banks in nations including Nigeria, Kenya, and Rwanda have so far announced measures from special loans to extending debt-repayment terms in an effort to counter the impact of the virus on their economies. South Africa’s Reserve Bank is forecast to lower its key rate by as much at 50 basis points on Thursday.
The Bank of Ghana equally announced additional key measures to support the economy, including lowering reserve requirements for lenders to 8% from 10% to provide liquidity support to critical sectors. Conservation buffer for banks is reduced to 1.5% from 3%, which effectively cuts the capital-adequacy ratio to 11.5% from 13%, lowering the cost of fund transfers through mobile money. And the apex bank said it will convene further “emergency meetings” when warranted.
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry