Extend COVID-19 interventions to support businesses – Economist to BoG
Dr. Adu Owusu Sarkodie - Economist
Following various interventions introduced by the Bank of Ghana (BoG) as a result of the outbreak on COVID-19 in Ghana, an Economist, Adu Owusu Sarkodie, has suggested an extension of these interventions introduced three months ago to support businesses.
Some of these interventions capture the central bank’s reduction of its policy rate which triggered a drop-in interest rate among commercial banks to cushion businesses within the period.
In March this year, the Monetary Policy Committee (MPC) of the Bank of Ghana lowered the policy rate by 150 basis points; from 16 to 14.5%.
The reason for the reduction was based on the fact that the coronavirus pandemic affected economic growth, making economic managers uncertain about the future.
Additionally, the outbreak of the virus led to a subsequent reduction in the interest rate by 2% drop for most commercial banks.
Also, some banks suspended interest payment for all customers whose loans matured during March, April, May and June, whereas others deferred loan repayment for their clients.
This provided some businesses with the opportunity to have access to more liquidity to finance various important projects.
As it stands now, there are several concerns as to whether the BoG’s intervention will be rolled over or exhausted as the operations of banks become uncertain. This is because banks need funds to also run their operations.
However, speaking in an interview, the Economist, Dr. Adu Owusu Sarkodie who also doubles as a lecturer at the University of Ghana said an extension of the incentives will be needed as the country’s coronavirus cases keep increasing with huge impact.
“The Bank of Ghana will by now be better informed to advise the Finance Minister or government as to whether they should continue with this package, and I think they should continue so that we can help businesses many of whom are collapsing and have laid workers off, and are not making as much profit as needed.”
“The government’s absorption of the water and part of electricity bills also helped to reduce the operation cost of business, and I think that the central bank should inform the government to encourage the continuation of such incentives.”
Interventions by the Government
President Akufo-Addo in April, announced the rolling out of a soft loan scheme of one billion cedis (GH¢1 billion), to support micro, small and medium scale businesses. Initially, a total amount of 600 million cedis was set aside to be used for the programme. But, the amount was later increased to 1 billion cedis following the support of some commercial banks in the country.
Also, commercial banks, with the support of the Bank of Ghana, have instituted a three billion cedi (GH¢3 billion) credit and the stimulus package, to help revitalise industries, especially in the pharmaceutical, hospitality, services, and manufacturing sectors.
This forms part of the Coronavirus Alleviation Programme (CAP) to manage the socio-economic impact of the COVID-19 pandemic.