The Governor of the Bank of Ghana (BoG), Dr Ernest Addison has stated that despite some weakening in export receipts due to lower crude oil production and a smaller balance of payments surplus, the cedi has remained relatively stable during the first half of the year.
He added that the country’s Gross International Reserves has “reached US$11.3 billion at the end of May 2021, providing cover for 5.2 months of imports of goods and services compared with a stock position of US$8.6 billion (equivalent to 4.1 months of import cover) at the end of December 2020”.
Dr Addison disclosed these at the Ghana National Chamber of Commerce & Industry CEO Business Forum on Wednesday.
The event was on the theme: Redefining Business Success: The Path For Business Value, Resilience And Sustainability.
Dr Addison said the Ghana cedi appreciated by 0.2 per cent against the US Dollar in the year to May 2021, compared with a depreciation of 1.3 per cent in the same period of 2020.
The BoG also noted that, “domestically, we have also seen the gains from these policies introduced to contain the effects of the pandemic—the Ghanaian economy has performed far better than its peers, and economic activity is rebounding faster than we observe with our peers with the Bank of Ghana’s Composite Index of Economic Activity showing a 26.8 per cent year-on-year growth in March 2021.
“The IHS Markit Ghana Purchasers Managers Index, which gauges the rate of inventory accumulation by managers of private sector firms and measures dynamics in economic activity, also improved to 52 in April 2021, from 51.7 in March”, Dr Addison said.
Impact of COVID-19
Dr Addison noted that the partial lockdown as a result of COVID-19 pandemic has led to temporary closure of many businesses in the sectors such as education, food and hospitality, and most businesses operated with low capacity utilisation and shortage of raw materials and intermediate goods due to supply chain disruptions.
“These developments forced businesses to embark on cost-cutting measures such as reduction in working hours, layoffs, and wage cutbacks. In addition to these, weak consumer demand led to businesses experiencing revenue losses, severe financing constraints and liquidity shortfalls, which posed challenges to servicing loans taken from financial institutions.
“These events demanded prompt policy reaction to moderate the potential spillovers to the broader economy, especially in terms of employment and growth. There were very clear and decisive policies introduced to cushion against the impacts of the COVID-19 pandemic on the Ghanaian economy.
“The government had to increase health and social assistance spending, including direct transfers to households through food distribution, several relief packages such as tax waivers for frontline health workers, stimulus packages for small and medium-scale enterprises, absorption of utility bills (electricity and water), etc. All these were aimed at protecting livelihoods, supporting businesses, minimising job losses, and providing additional funding sources to industries to shore up output for domestic consumption.
“The Government introduced an Emergency Preparedness and Response Plan of GH¢560 million (US$100 million). Clearance was given to increase staff in the health sector by employing 24,255 health workers for testing, tracing and treatment. The government also refurbished 10 treatment centres across the country, introduced a GH¢10.3 million insurance package for health workers and livelihood preservation programme targeting 4.1 million households and 682,522 businesses”.
BoG’s response
Dr Addison said the BoG has also responded to complement government’s COVID-relief measures with a raft of policy and regulatory measures to loosen financing conditions, ease liquidity pressures, and keep supply of credit to support critical sectors of the economy.
“In particular, the Bank reduced the policy rate by 150 basis points to 14.5 per cent; reduced the primary reserve requirements and the capital conservation buffer for regulated financial institutions.
“In collaboration with other stakeholders, the Bank also announced a reduction in the cost of mobile money transactions and purchased a 10-year Government of Ghana COVID bond with a face value of GH¢10.0 billion to augment governments’ financing requirements.
“Commercial banks in return also provided reliefs including loan restructuring and repayment moratoria, especially for firms in the worst-hit sectors. In total, about GH¢1.5 billion loans were restructured, of which the Manufacturing sector accounted for 24.5 per cent share, Services with 24.3 per cent, and Transport, Storage and Communication had 11.5 per cent. These timely fiscal and monetary policy responses helped avert a very sharp contraction of the economy and spurred a faster recovery in the domestic economy,” Dr Addison stressed.
