Bank of Ghana reduces monetary policy rate to 14.5%

The Monetary Policy Committee (MPC) of the Bank of Ghana has reduced the Monetary Policy Rate by 150 basis points to 14.5 per cent.

This means that interest rate payable on short-term borrowing or the money supply, often targeting inflation or the interest rate to ensure price stability has been reduced.

Following the assessment of the Bank, the negative impact of COVID-19 on exports, imports, taxes, and foreign exchange receipts will culminate in a slowdown in economic activity_ hence the monetary policy rate reduction.

In a press release dated, March 18, 2020, the MPC decided following the outbreak of the global pandemic, Coronavirus (COVID-19) which has significantly heightened uncertainty in the financial market.

Good news for Mobile Money Subscribers

Effective March 20, 2020, banks and mobile network operators will facilitate more efficient payments and promote digital forms of payments for the next three months, subject to the policy review.

Equally, all mobile money users have the liberty to send up to GH₵100 for free (excluding cash out) without charges. This includes monies sent to a recipient on the same network and other networks using the interoperability platform.

Also, all mobile phone subscribers are now permitted to use their already existing mobile phone registration details to be on-boarded for Minimum Know Your Customer (KYC) Account.

Through this process, mobile network operators will be able to collect the details of clients to ensure that monetary services are not misused.

Below are the changes made to mobile money services:

 

Daily transaction limits for mobile money are increased as follows:
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Mobile money wallet limits are also increased as follows:
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Revised aggregate monthly transaction limits are as follow as:
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Other additional measures put in place by MPC

Also, the Primary Reserve Requirement has been reduced from 10 per cent to 8 per cent to provide more liquidity to banks to support critical sectors of the economy.

Meaning the minimum amount of cash required to operate in a bank has been also reduced from the 8 to 10 per cent as stated above.

The reduction effectively extends the previously targeted reserves for SMEs under the enterprise credit scheme to all critical sectors.

On the part of the Capital Conservation Buffer (CCB) for banks of 3.0 per cent has also been reduced to 1.5 per cent. The move is purposely to enable banks to provide the needed financial support to the economy.

With this, the Capital Adequacy Requirement effectively reduces from 13 per cent to 11.5 per cent.

Additionally, provisioning for Loans in the “Other Loans Especially Mentioned” (OLEM) category will see a reduction from 10 per cent to 5 per cent for all banks and Specialised Deposit-Taking Institutions (SDIs) as a policy response to loans that may experience difficulty in repayments due to the global pandemic, slowing down economic activity.

However, provisioning norms for loans in all other categories are maintained. This should provide capital relief to banks and SDIs in these uncertain times.

For loan repayments that are past due for Microfinance Institutions for up to 30 days shall be considered as “Current” as in the case for all other SDIs.

With all the measure put in place, Bank of Ghana says it will closely monitor developments regarding the impact of COVID-19 on the domestic economy, and will not hesitate to arrange an emergency meeting to deliberate on other measures only if required.

However, the Monetary Policy Committee (MPC) has scheduled its next meeting to take place between May 19 and 21, 2020.

The conclusion of the meeting on Friday, May 22, 2020, will announce the policy decision.