Bank of Ghana cuts policy rate by 150 points in response to COVID-19 Featured

The Bank of Ghana (BoG) has reduced its benchmark policy rate by 150 basis points as its first response to the strain that the new coronavirus disease (COVID-19) is imposing on Ghana’s economy.

It is expected that this will also lead to a drop in rates for commercial loans.

The bank reduced the policy rate, which is the benchmark for interbank lending, from 16 per cent to 14 per cent yesterday.

The announcement came in a release signed by the Governor of the Bank of Ghana and chairman of the Bank's Monetary Policy Committee (MPC), Ernest Addison.

The statement followed the conclusion of the 93rd meeting of the MPC , which reviewed activity in the economy and the impact of global developments on Ghana.

The reduction is the first since November 2018, and is expected to combine with other factors to make the cost of credit cheaper.

COVID-19’s effect on growth

The central bank fears that COVID-19 could collapse growth for 2020 to 5 per cent; in a worst-case scenario it could go as low as 2.5 per cent, BoG experts say.

The reduction in the rate could make it cheaper for businesses to access funds to revitalise their operations.

“In 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,” Dr Addison said. “GDP growth is forecast to decline to 5.0 per cent in a baseline scenario. In the worst-case scenario, GDP growth estimates could be halved to about 2.5 per cent in 2020.

“These assessments are preliminary, as the situation is very fluid and the degree of uncertainty concerning the outbreak is very high. This means that there is a likelihood that these assessments could change rapidly,” he said.

MoMo charges down

In an additional move to promote the use of digital money transfer platforms, the BoG announced that mobile money transfers worth up to GHC100 are now free of charges.

“All mobile money users can send up to GHC100 for free (excluding cash out). This includes sending to a recipient on the same network, or another network via the interoperability platform,” the Bank’s statement said.

The BoG also disclosed that daily thresholds for various mobile money wallets have been increased. These will take effect from tomorrow, March 20 2020.

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Last modified on Friday, 20 March 2020 13:00

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