BoG prepares to unwind some countercyclical measures
By Elorm Desewu
The governor of the Bank of Ghana, Dr Ernest Addison has disclosed that the bank would carefully unwind some countercyclical measures implemented to return the macroeconomic environment to the pre-COVID path and allow the financial system to function without the regulatory forbearance to support Ghana’s beyond Aid Agenda.
According to Dr Addison, the bank would also continue to implement sound policy measures aimed at restoring confidence and preserving stability of the Ghanaian economy.
“The Bank’s response to the ongoing COVID-19 pandemic is further demonstration of its constant adaptation to the needs of the economy, while seeking to maintain price stability and financial stability.
As central bank and banking sector regulator, the Bank of Ghana has responded to the unprecedented economic impacts of the pandemic with a number of policy and regulatory interventions including a reduction in its monetary policy rate, reduction of reserve requirements for banks and specialized deposit-taking institutions, reduction in the capital conservation buffer maintained by banks, reduction in provisioning requirements for certain categories of loans, and the purchase of Government bonds to support economic recovery efforts”, he said.
These interventions have released liquidity in the banking system which has allowed banks to restructure existing loans and grant new ones to better support their clients. The Bank of Ghana’s ability to respond is a function of the policy space that was created prior to the pandemic, due to effective monetary policy and regulatory measures.
Ghana’s economy has been severely impacted by the pandemic, as economic activities slowed down significantly, and impacted negatively on individuals and businesses.
Economic activity which dipped significantly during the peak of the lockdown, is already beginning to pick up as monitored by the Bank’s updated Composite Index of Economic Activity. The business and consumer confidence surveys conducted in June 2020 also shows some turnaround in sentiments reflecting the gradual lifting of the restrictions.