Coronavirus: Reduced policy rates benefitted businesses in 2020 – GNCCI

The Chief Executive Officer (CEO) of the Ghana National Chamber of Commerce and Industry (GNCCI), Mark Badu-Aboagye has asserted that businesses greatly benefitted from the policy rate reduction by the Bank of Ghana last year.

In its effort to stimulate the economy and protect the country from the impact of COVID-19, the Monetary Policy Committee of the Bank of Ghana (BoG), last year, reduced the monetary policy rate by 150 points to 14.5%.

Commenting on the impact on businesses in Ghana, Mark Badu-Aboagye stated that while usually the effect of policy rates reduction are not directly felt, in this particular situation, businesses profitted from this move.

He told Samuel Eshun on e.TV Ghana’s Fact Sheet show, “You will realize that the effects of the policy rate on the lending rate is very minimal so you will have a situation where they will reduce the policy rate but it will not have an immediate direct impact on the lending rate. However in this case, there were some banks that decided to reduce their lending rate as a support to businesses. There were some banks that also decided that they will restructure the payment for businesses. So if they [the businesses] were supposed to pay interest and principal within that period there was an agreement that you can postpone the payment so the money that that were supposed to have been paid to the bank would have come back into the businesses. So I think in a way it helped.

He furthered that the result of the reduction in policy rates has reflected in the recent information given by the Bank of Ghana on the lending rate in the country.

The Bank of Ghana (BoG) has indicated that growth has picked up in the domestic economy since the sharp contraction in the second quarter due to the novel coronavirus.

A recent Monetary Policy Committee press release issued by the central bank, which disclosed this, emphasized, “All the high-frequency indicators of economic activity have rebounded, consumer and business confidence levels are back at pre-lockdown levels and there are indications of steady growth in the private sector credit. However, the renewed threat from the second-wave of the pandemic has again heightened uncertainty and could hamper the recovery process in the near-term.”

Meanwhile, the committee announced that it had decided to keep the policy rate at 14.5 percent.