ghananlpcommunity/ghana-gov-speeches-sentences huggingface dataset:
Although some c ountries have made significant progress, threats of second -wave of infections and concerns about the re -imposition of restrictive movements, have heightened uncertainty.
A recent study2 that investigated the long-term impact of a sample of 12 major epidemics in Europe concluded that pandemics are followed by years of low natural interest rates 3, as the accommodative policy stance persists for a longer period due to household behaviour which raises precautionary savings and depresses investment opportunities.
On this basis, it is expected that the global, and indeed, the domestic outlook will be challenging with a longer recovery process.
Domestically, the Bank of Ghana, in collaboration with the Fiscal authorities, responded decisively to ensure easing credit conditions and liquidity within the financial sector to stimulate economic activity.
Bank of Ghana’s action to trigger emergency financing support for 2 Jordi et al.
(2020) 3 The relative demand and supply of loanable funds by savers and borrowers determine the natural rate in the long -run.
35 | P a g e the government was largely enabled by the policy space and gains achieved over three years of strong monetary policy reforms.
Prior to this action, the Bank had observed a strict zero financing of the budget in line with a Memorandum of Understanding between it and the Ministry of Finance as part of the IMF programme.
This policy therefore represented a major policy shift reflecting the “whatever it takes” posture to preserve lives and livelihoods, which helped in closing the budget’s widened financing gap arising from increased COVID-related spending as revenues dwindled.
These measures provided some fiscal space for government to help sustai n the income of households, businesses and consequently supported a quicker turnaround in economic activity.
The relatively strong macroeconomic outturn in 2020 in the midst of the pandemic showing strong foreign reserves buffers, low inflation, relatively stable exchange rates can be attributed to the prudent policy measures implemented over the last three years including the recapitalisation of banks.
Indeed, the data shows that 36 | P a g e since 2018, non -resident holdings of domestic debt have declined from 32% to around 18% in 2020 even as government financing needs remained high.
This has been possible due to the recapitalisation of the banking sector which has given banks enough resources to allow them to substitute for the exit of non -resident investors in the government bond instruments.
The recapitalisation policy therefore accounts partly for the relatively stable economic conditions, it is anticipated that should the projected consolidation of fiscal policy materialise, we should begin to see these resources channelled back to private sector financing which was the major rationale for the recapitalisation of the Banks.
At the end of the year, the stage is set to redesign a medium-term macroeconomic framework to return the economy to fiscal consolidation and to further consolidate macroeconomic stability to provide an essential lever for positioning the Ghanaian economy on a path of higher growth, job creation, and faster pace of poverty alleviation.
Public debt levels have risen following the necessary fiscal 37 | P a g e expansion in the short-term to contain the impact of the pandemic.
Hence, there is the need to design a plan to bring down the debt to sustainable levels to contain risks posed to future financing of the budget, exchange rate stability a nd financial sector stability post Covid-19.
The framework should include a clear priority to wards expenditure rationalization and efficiency, as well as improving revenue collection capacity.
Ghana’s public debt has reached 71 percent of the estimated GDP at the end of September 2020, fairly above the maximum early warning sustainability threshold of 70 percent for the Market Access Countries (MACs).
The country’s debt service indicators and gr oss financing needs have breached the sustainability thresholds.
The non-resident holdings of the public debt, although declined, is still high at 59.9 percent of GDP, above the threshold of 45 percent for the MAC.
Public gross financing needs are also above the 10 percent MAC threshold on the back of increased fiscal obligations, suggesting constrained fiscal space for growth spending.
Although external 38 | P a g e financing requirement as a share of GDP has declined and within acceptable thresholds, efforts would nee d to be put in place to increase buffer levels to help meet future external obligations.
In ensuring financial stability, the financial sector will require constant regulatory and policy attention to identify and mitigate emerging risks.
By and large, the economic impact of the pandemic may result in higher non-performing loans and some capital erosion of banks.
Hence, the Bank is putting greater focus on identifying the early warning signals and initiating prompt corrective action s. The symptoms of a we aker bank are usually poor asset quality, lack of profitability, loss of capital, excessive leverage, excessive risk exposure, and poor governance conduct as well as liquidity concerns.
In this respect, the Bank of Ghana will continue to strengthen all the regulatory measures implemented over the last three and half years to maintain confidence and safeguard financial stability.
Over the next three years, i n the aftermath of the pandemic, the Bank of Ghana will carefully unwind the countercyclical measures 39 | P a g e implemented and allow the financial system to function without the regulatory forbearance put into place due to the pandemic .
Banks themselves will have to remain vigilant, upgrade staff capabilities, and improve the governance and risk culture.
The Bank of Ghana is optimistic that with this approach, a resilient and capable financial sector will weather the storms brought about by the pandemic and ensure soundness of the industry.
Ladies and gentlemen, prior to the pandemic, the Government initiated and implemented policies including the National Financial Inclusion and Development Strategy, the Digital Financial Services Policy, and the Cash -Lite Roadmap, with an overall objective of deepening financial inclusion and accelerat ing the shift to digital payments in the country.
The significant progress made in this area has significantly helped in the fight against the pandemic with an exponential growth in the volumes and values of the digital payment platforms in Ghana.
Promoting financial technology has already been at the forefront of the Bank of Ghana’s agenda and we will continue 40 | P a g e to invest in the supportive infrastructure, improve on the regulatory environment, as well as contain all the associated risks to help achieve financial inclusiveness and digital financial transactions to support the national objective.
Conclusion 43.
In closing, Fellow Alumni, let me leave you with some food for thought.
First, after almost four years of prudent management of Ghanaian economy, the Covid-19 external shock has partly reversed the progress made on the macroeconomic stability front.
So far, the fiscal costs, in terms of stimulus package deployed to moderate the adverse socioeconomic consequences on the households and businesses, is estimated at over G H¢11.2 billion.
If you add the financial sector costs and the energy sector costs raises the estimate of the financial burden from these three sources alone to GH¢24 billion.
As at half year it was estimated that government paid GH¢4.7 billion in excess capacity payments in the energy sector.
This has 41 | P a g e pushed the debt/GDP ratio above the threshold for the Market Access Countries.
Going forward, difficult decisions will have to be taken to reorganize public finances and expenditure priorities while exploring more sustainable revenue sources.
The programme of interventions to revitalize businesses and cushion households will have to be defined to scale and there should be no expectation that these should become permanent obligations o f government.
The wide fiscal gap raises important financing issues, and its financing should not be by recourse to central bank funds as this will weaken the central bank’s ability to serve as the anchor of monetary and exchange rate stability.
Vice Chancellor, Distinguished Ladies and Gentlemen, let me conclude by reiterating that, the global economy is not out of the woods yet and neither is the Ghanaian economy.
The pandemic and its socio-economic impact would be felt long after we have reached 42 | P a g e herd-immunity and started seeing the full benefits of the success in the vaccines.
Which means as public policy makers , we will still be faced with tough decisions that require a response function asymptotic to Pareto principles.
The critical decisions that we take will be judged by posterity.
I thank you all for the attention.
2020 ANNUAL DINNER OF THE CHARTERED INSTITUTE OF BANKERS (GHANA) ADDRESS BY BY DR.
ERNEST ADDISON, GOVERNOR, BANK OF GHANA VENUE: ACCRA INTERNATIONAL CONFERENCE CENTRE NOVEMBER 28, 2020 1 The President, Chartered Institute of Bankers (CIB), Members of the Governing Council of CIB, Chief Executive Officers of Banks, Associates and Fellows of CIB, Distinguished Guests, Ladies and Gentlemen, 1.
It is a great pleasure to see everyone hale and hearty at this Dinner event as we climax this year’s Bankers Week celebrations .
Undoubtedly, 2020 has been a n extraordinary and interesting year, characterised by widespread disruptions and heightened uncertainties emanating from the COVID-19 pandemic.
Lockdowns, border closures, social distancing, and rotation of staff at work —the new normal —have become part of our vocabulary , and the wearing of facemasks as if we were in a masquerade party should remind us that these are not normal times.
Four years ago I gave my premier address to this gathering and I recollect the mood at the time, and the anxiety that had gripped the banking community after we had revoked the licenses of two banks earlier in July that year.
That anxiety was well founded as we revoked seven more licenses in the years that followed.
Today we are almost complete in the reform of the banking sector and I believe there’s not much apprehension or anxiety, so relax enjoy your desserts.
You w ill not hear anything that will cause you indigestion.
Let me first commend the Chartered Institute of Bankers for continuing with the tradition of hosting the Annual Dinner event under these unusual circumstances.
My brief remarks today will broadly focus on “resilience in the midst of the COVID-19 pandemic, and outlook for the sector”.
Madam President, 2020 has been a difficult year.
After three years of prudent management of the Ghanaian economy, we ended the year 2019 with significant consolidation of fiscal policy, a decline in the rate of inflation, robust build-up of international reserves of the central bank, and stability in the exchange rate.
Then come beginning of 2020; the Ghanaian economy was hit with an external shock, the Covid -19 Pandemic, which impacted negatively on global trade, commodity prices, tourism and international capital flows.
Apart from the public health challenges associated with the Pandemic, it also brou ght in its wake unprecedented economic consequences with disruptions in global supply chains, and heightened uncertainty in global financial markets.
The imposition of restrictions disrupted economic activity.
The Pandemic led to general anxiety, volatile expectations, and unprecedented levels of uncertainty, all of which weighed heavily on public policy, at the centre of which is macroeconomic management.
Madam President, the Government was very swift in its response and His Excellency the President provided excellent leadership by rising up to the 3 challenge that the Pandemic had brought to the economy.
The Government decided to do “whatever it takes” to minimize the impact of the Pandemic on citizens including a stimulus package of over GHc11.2 billion to address the social and economic consequences.
To complement the fiscal policy actions, the Bank of Ghana deployed its various tools , namely interest rate tool, macro -prudential policies, market liquidity support, and triggered its emergency financing clause to purchase a Government COVID-19 Bond.
Specifically, the Bank of Ghana introduced the following regulatory and policy interventions:  The Monetary Policy Rate was reduced by 150 basis points to 14.5 percent to complement fiscal policy and provide support to economic growth;  The cash reserve requirement (CRR) ratio for banks was lowered from 10 to 8 percent to provide additional liquidity to Banks.
This policy measure was expected to free up additional resources of about GHS2 billion for banks and SDIs to lend to critical sectors of the economy;  The CRR for RCBs, S&Ls, Finance Houses was reduced from 8 to 6 percent; and from 10 to 8 percent for microfinance companies; 4  The Capital Conservation Buffer was reduced by 1.5 percentage points to 11.5 percent and providing capital relief of about GHS1.1 billion for banks;  The provisioning requirements for loans categories was reduced from 10 to 5 percent and which translates to about GHS115.3 million in capital relief to Banks;  Restrictions were imposed on d ividend and other capital distributions for the financial years 2019 & 2020 to preserve liquidity and capital buffers;  The deadline for new capital requirement for SDIs (MFIs and RCBs) was extended to December to provide temporary relief to SDIs, given current economic conditions;  The Bank of Ghana requested B anks to grant 3-12 months moratorium on principal payments on loans granted to customers in the worst pandemic-hit sectors;  A reduction in mobile money charges and waiver of transaction fees on minimum transactions (GHS100) and increased wallet limits was agreed with the TELCOS to promote electronic transactions as part of COVID protocols; 5  The combination of these measures translated into a relief of more than GH¢4.0 billion to the economy, and with multiplier effects strong enough to provide the necessary impulse required to contain threats of recession and support economic recovery efforts post COVID-19.
In addition, the Bank of Ghana, unlike other peer central banks, was able to utilize its policy space—gains from over three years of strong monetary policy reforms—by triggering the emergency clause of the BoG Act to allow the Bank purchase Government of Ghana COVID -19 relief bond (GH¢10 billion), in line with provisions of the BOG Act 2002 (Act 612), as amended Act 918.
It should be known that over the last three years, the Bank had observed a strict zero financing of the budget in line with a Memorandum of Understanding between it and the Ministry of Finance as part of the IMF programme.
This policy therefore represented a major policy shift reflecting the posture of doing “whatever it takes” to preserve lives and livelihoods and this helped in closing the widened financing gap of the budget arising from increased COVID-related spending as revenues dwindled.
Madam President, the banking industry deserves commendation for the positive response t o the Bank’s monetary policy actions and regulatory relief measures.
Following the announcement of the measures , Banks have provided various reliefs to customers through reduction in lending rates, granted moratoria on loan repayments , restructured existing 6 facilities, and advanced new loans to customers .
Broadly, these actions have helped moderate the economic impact of COVID -19 on customers and minimised the potential disruptions in credit flows.
There is no doubt that these responses have contributed significantly to the much faster pace of economic recovery than anticipated.
To safeguard financial stability, in the midst of the pandemic, the Bank, in consultation with the industry, provided guidance to ensure that reliefs such as repayment moratoria, and extended and restructured loans and advances to customers were transparent and standardised while recognising the prudential treatment that the BoG will apply to such reliefs in its assessment of credit and liquidity risks and capital ratios.
Broadly, the Bank’s COVID -19 policy interventions has positively influenced the banking sector and the economy.
At the last MPC meeting, we assessed the banking sector to be liquid, profitable, and well capitalised.
The Financial Soundness Indicators are strong and Banking Sector Stability Index monitored by the Bank remains in high positive territories indicating the resilience of the sector.
The recent BoG survey on the impact of the pandemic on Banks showed that while the Pandemic has increased the industry’s cost of operations, Banks have not passed on the associated costs to consumers through higher interest margins.
This is laudable.
7 10.
The effect of the Pandemic also requires some supervisory and regulatory adjustments to keep pace with the new normal.
During last year’s Annual Dinner, I mentioned that the Bank would improve on the credit infrastructure to enhance credit allocation in support of growth.
Collateral Registry 11.
Madam President, the Bank has improved operations of the Collateral Registry to enhance the credit infrastructure, established stronger data management systems, put structures in place to strengthen financial integrity and promoting financial inclusion.
The Bank has rolled out an online payment module in May 2020 for users of the web -based system to reduce the challenges associated with the traditional mode of paying for Collateral Registry’s services.
Th is single action has provided convenience such that users can access the Registry’s services through cashless payments, either mobile money or Visa/MasterCard.
As at the end of October 2020, online payment for the Registr y’s services accounted for 76 percent of total pre -payments, for the 28,403 online searches recorded.
Indeed, the COVID-related restrictions did not deter banks and other lending institutions from registering their security interests in collaterals due to the online accessibility of the Registry’s system.
Cumulatively, the Collateral Registry recorded 80,172 secur ity interests from January to October 2020.
Of this, savings and l oans companies accounted for the highest number of 54,493 security interest’s registration, representing 68 8 percent of the total, followed by r ural banks with 11,663 (14.6%) and banks with 8,473 (10.6%).
The re maining registrations were by Microfinance companies, Micro -credit Companies and Finance Houses , among other lending institutions.
In terms of assets pledged by borrowers, the Collateral Registry recorded 168,707 assets as part of th e security interests in the year to October 2020.
Of the registered assets, cash collaterals numbered 53,859 (31.9%), followed by consumer/household assets of 30,617 (18.15%), inventories at 29,090 (17.24%), company assets at 16,304 (9.66%) and fixtures and fittings were 15,950 (9.45%).
Credit Reporting 14.
To improve the credit environment further, the Credit Reporting Regulations, 2020 (LI.
2394) were enacted in March 2020 to complement the Credit Reporting Act 726.
Among others, the Regulations provide clear sanctions for breaches such as non-submission of data and under-reporting as well as failure to conduct credit searches prior to granting credit.
In addition, the Bank, together with various stakeholders, concluded the review process of the Borrower s and Lenders Bill, 2020 , which Pa rliament has passed, and is currently awaiting Presidential assent.
The Borrowers and Lenders Bill will seek to improve standards of disclosure of information on lending and borrowing and promot e a consistent loan recovery and enforcement system by lenders.
9 Data Management Systems 15.
The Bank has also introduced an Online Reporting and Analytics Surveillance System (ORASS) to replace the Electronic Financial Analysis Surveillance System (eFASS) and the Online Electronic Surveillance System (OOESS).
Key aspects of the ORASS include the Regulatory Returns (for submitting prudential returns), Licensing Transactions (for licencing applications and other related requests for approvals), and Risk- Based Supervision modules (for examination purposes).
The roll out of the project is currently ongoing alongside training programmes for reporting institutions.
A regulatory returns mod ule has been set up for parallel submissions until the end of 2020.
Maintaining Financial Integrity 16.
Ladies and Gentlemen, you would recall that during the year, the EU listed Ghana among countries with strategic deficiencies in their AML/CFT regimes.
This listing although does not lead to any sanctions or restrictions in trade relations, can have serious consequences to the financial sector, including a higher level of due diligence from correspondent banks on their Ghanaian respondent banks and the de - risking which could disengage us from the international financial system.
We call upon the governing boards and management of banks to do their part and stay in compliance within the country’s AML/CFT laws and regulations.
10 17.
Accordingly, the Bank of Ghana has intensified s urveillance of the financial system to identify potential systemic risks, market conduct breaches, and Anti -Money Laundering/Combating the Financing of Terrorism (AML/CFT) deficiencies .
This will pave the way for prompt remedial actions aimed at improved resilience and p ublic confidence.
In light of this, the Bank has revised the AML/CFT Guidelines for the industry, introduced a sanction regime, increased sensitization and established a regulatory forum to boost correspondent banking relations and general health of the financial system.
The continued cyber security threat to the banking sector has become more critical with the advent of COVID and the switch to more technology based financial services delivery.
The Bank has continued to monitor these developments and enforce standar ds that adequately protect consumers and promote public confidence.
During the year, the Bank resolved several customer complaints, conducted onsite and offsite examination exercises to enforce guidelines on recourse mechanisms and transparency, increased financial literacy programs to help consumers navigate through the pandemic, and reviewed innovative products to ensure its compliance with market conduct standards.
Currently, the Bank is preparing directives to regulate unclaimed balances and consumer protection requirements for digital financial services and products.
11 Payment System and Financial Technology 19.
Madam President, COVID-19 has pushed the frontier towards financial technology and from observations, banks have already taken up the challenge to digitise financial services and product offerings.
At the onset of the pandemic, the Bank introduced measures to enhance mobile money transactions and increased public education on mobile money and other electronic mo ney fraud.
Ghana’s payment systems achieved a nother milestone with the launch of the universal QR code payment solution in March 2020.
This strengthens the financial inclusion agenda and promotes the use of contactless payments , which is critical in the fi ght against the coronavirus.
The harmonisation of QR codes on a national level has paved the way for Ghanaians to make payments to merchants from multiple funding sources such as mobile wallets, cards or bank accounts, on all platforms.
In line with provisions in the Payment Systems and Services Act 2019 (Act 987), the Payment Systems Advisory Committee was established to advise the Bank on regulations, oversight, operational and technical issues of payment, as well as clearing and settlement systems.
In May 2020, the Bank announced the establishment of the Fintech and Innovation Office responsible for financial technology and payment innovations.
The Office is expected to drive the digitisation agenda of the Bank , and is responsible for licensing and o versight of dedicated electronic money issuers (mobile money operators), and payment service providers (PSPs), among others.