Accra, Ghana//-Credit to the private sector slowed at its lowest pace in 12-months in February 2021, signaling a slow movement towards recovery of the economy from the Covid-19 induced slowdown of 2020.
Annual nominal growth in private sector credit slowed to 7.4 percent in February 2021 compared with 21.8 percent, in the corresponding period of 2020, the Monetary Policy Committee of the Bank of Ghana (BoG) indicated in its latest report.
Similarly, real private sector credit contracted by 2.7 percent compared to a growth of 12.9 percent over the same comparative period, it added.
While the MPC’s Chairman and Governor of BoG, Dr Ernest Addison said: “Private sector credit growth slowed in the first two months of the year due to constrained demand for credit”.
Interest rates on the money market broadly showed downward trends for shortdated instruments and mixed trends for medium to long-dated instruments, he said.
“The 91-day and 182-day Treasury bill rates declined to 13.6 percent and 14.0 percent respectively in February 2021, from 14.7 percent and 15.2 percent respectively, in February 2020.
Similarly, the rate on the 364-day instrument decreased to 16.9 percent from 17.8 percent over the same comparative period. Rates on the secondary bond market have also generally declined, except for rates on the 5- year bond which increased by 35 bps to 19.9 percent”, according to Dr Addison.
Yields on 2-year, 3-year, 6- 5 year and 7-year bonds declined, while rates on the 10-year, 15-year and 20-year bonds remained unchanged.
The weighted average interbank rate declined to 13.6 percent from 15.9 percent, in line with the cut in the monetary policy rate in March 2020, and improved liquidity conditions due to the COVID regulatory relief measures.
Consequently, average lending rates of banks declined to 21.0 percent in February 2021 from 23.4 percent in the same period of 2020, consistent with developments in the interbank market.
Kwame Gyan Kwakye and David Elmaleh, both economists at the World Bank Ghana office, were delighted that the success of the ongoing COVID-19 vaccination programme embarked upon by the government would help speedy up the recovery of the country’s economy.
But they warned that the country’s recovery would be subdued if the rest of world does not accelerate their vaccination exercises.
Evidence from household and enterprise surveys administered in May–June 2020 suggests that the COVID-19 pandemic has had widespread negative effects in Ghana.
The surveys asked both households and enterprises to report any changes to their economic status since March 2020, when the government began to introduce measures to control the local spread of the virus.
Most households reported a loss of income; this was especially true of households that received self-employment income, remittance income, or private transfers.
The decline in remittance income and private transfers was presumably due to the loss of labour income by the benefactor.
But only about one-quarter of households indicated that they were severely affected by business failure or loss of employment.
Most enterprises reported a loss in revenue due to decreased sales, and a sizeable percentage reported an increase in the cost of production due to higher prices for inputs. As a coping response, affected enterprises have tended to reduce worker pay and hours rather than laying off workers.
Enterprises indicated they would prefer assistance mainly in the form of cash transfers, deferrals of rental payments, and loans with subsidized interest rates.
However, the percentage of enterprises and households that received any formal assistance was in the single digits.
By Masahudu Ankiilu Kunateh, African Eye Report
