BoG must cut policy rate substantially – Ricketts-Hagan on coronavirus effects

Former Deputy Minister of Finance and MP for Cape Coast South, Kweku Ricketts-Hagan has asked the Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) to consider taking an exceptional measure to cut the policy rate significantly to buttress the economy against the Global coronavirus pandemic, at their next meeting at the end of this month.

Commenting to the media on the Minister of Finance's response to Parliament on the Coronavirus pandemic, he welcomed the government's efforts so far in handling the deadly Covid-19 coronavirus disease and has encouraged the government to be truthful and transparent with the people in every step of the way to control the spread of the virus until a vaccine is found hopefully later in the year to deal with the pandemic.

However, he has questioned the $100 million that the government said it has allocated to combat the coronavirus, without specifying what the money will go towards.

In addition, he has asked the Central Bank to cut its policy rate quite substantially to boost liquidity to counter the impact of coronavirus and support economic activities to significantly fend off a deep recession.

He said “The pandemic is going to have a profound impact on the economy, so BoG is going to be needed to step up to the economic plate of Ghana big time. I can understand the central role of BoG to maintain price stability in the medium term but these are extraordinary times, and inflation remains stable.”

He further said that the government also needs a “coronavirus cash bailout” for small, medium and large businesses that would be severely affected such as tourism, travel, hospitality, conferences, entertainment, etc., to support and help them to stay afloat and avoid massive layoffs.

He was also critical of the Finance Minister’s response to Parliament, that the Finance Minister’s response to Parliament on the matter as inadequate, though he agreed that the events of the coronavirus are still unfolding and may still be too early to tell just how far-reaching the effects will be, but he said it is also abundantly clear, from what is going on around the world, that the outbreak is already having a major impact on the Global economy and invariably Ghana’s economy.

“This is not only going to affect negatively on a few sectors of the economy as the Finance Minister was alluding to, but rather consume the whole economy negatively and possibly send us into a severe long recession because it is predicted that this crisis is going to be bigger than the Global financial crisis of 2008, therefore the government needs to get to grips with things and anticipate what is likely to happen very quickly, and start putting serious recovery plan and preparation in place now, to try and protect early, the economic and financial shocks that will be felt for a long time even when the medical recovery has begun.”

He said it is not enough to be talking about closing possible financing gap in the 2020 Budget or addressing the fiscal implications, the whole Economic Management team (EMT) machinery, which includes the Ministry of Finance, the Bank of Ghana, all the economic Ministries including Trade and industry and Employment will need to up their game and put more radical measures in place to help the economy, because these are extraordinary times. We are going to need a massive fiscal and monetary response in addition to a mega stimulus package for businesses to weather the storm and limit the economic impact from this global coronavirus outbreak.



“The BoG will probably have to cut the policy rate by about 200 basis point (2%) to counter the risk imposed by the coronavirus pandemic.”