COVID-19 stimulus cost us GHC 11.2 billion – BoG

The government spent in excess of GHC 11.2 billion to provide relief for citizens to mitigate the adverse effects of the COVID-19 pandemic.

The government had to support businesses and citizens who were reeling the devastating impact of the pandemic.

Among the interventions were free water, subsidized electricity, health workers allowance, food, Personal Protective Equipment (PPEs), 600m support for Small and Medium Scale Entreprises and a GH¢1 billion Coronavirus Alleviation Programme (CAP) business support scheme.

According to the Governor of the Bank of Ghana (BoG), these and many more consumed a chunk of the country’s financial resources.

“The government decided to do “whatever it takes” to minimize the impact of the pandemic on citizens including a stimulus package of over GHc11.2 billion to address the social and economic consequences,” he said at the 2020 Annual Dinner of the Chartered Institute of Bankers (Ghana) held in Accra.

Dr Addison explained that the COVID-19 impacted negatively on global trade, commodity prices, tourism and international capital flows.

Apart from the public health challenges associated with the pandemic, it also brought in its wake unprecedented economic consequences with disruptions in global supply chains, and heightened uncertainty in global financial markets.

To mitigate job losses and other consequences in the financial sector, the BoG implemented a myriad of interventions. Among them were policies also aimed at economic growth.

Some of them include the following:

 The Monetary Policy Rate was reduced by 150 basis points to 14.5

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 SDIs to lend to critical sectors of

the economy;

 The CRR for RCBs, 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 & 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;

 The combination of these measures translated into a relief of more

than GH¢4.0 billion to the economy, and with multiplier effects

strong enough to provide the necessary impulse required to contain

threats of recession and support economic recovery efforts post

COVID-19.

In addition, the Bank of Ghana, unlike other peer central banks, was able

to utilize its policy space—gains from 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 said all the financial soundness indicators, measured in terms of earnings, liquidity, and capital adequacy showed significant improvement.

However, the financial sector will require constant regulatory and

policy attention to mitigate the risks.

“The economic impact of the pandemic may result in higher non-performing loans and some capital erosion of banks,” he added.

So far, the country has recorded 51,667 out of which 50,547 have recovered or been discharged with 323, according to the Ghana Health Service (GHS).