The Bank of Ghana says it has begun the purchase of Government of Ghana COVID-19 relief bond with a face value of GH¢5.5 billion at the rate of 14.5 per cent with a 10-year tenor and a moratorium of two years.
Dr Ernest Addison, the Governor of the Bank of Ghana, said the Bank was making the purchases under the Asset Purchase Programme as preliminary assessments showed that the financing gap estimated at the time of applying for the International Monetary Fund Rapid Credit Facility in March had widened significantly, resulting in a large residual financing gap.
He said current market conditions in the wake of the pandemic would also not allow the financing of the gap from the domestic debt capital markets without significantly increasing interest rates.
“Under the circumstances and in line with section 30 of the Bank of Ghana Act, 2002 (Act 612) as amended, the Bank of Ghana has triggered the emergency financing provisions, which permits the Bank to increase the limit of BOG’s purchases of government securities in the event of any emergency to help finance the residual financing gap,” he said.
“The Bank stands ready to continue with its Asset Purchase Programme up to GH¢10 billion in line with the current estimates of the financing gap from the COVID-19 pandemic,” Dr Addison said.
He said the COVID-19 pandemic had put a severe strain on the budget, manifesting in petroleum revenue shortfalls as a result of plunging crude oil prices, shortfalls in import duties, other tax revenues, and non-tax revenues.
To further provide economic relief to households and businesses, and to increase credit to the key sectors of the economy, the BOG said it was activating additional relief measures to the Specialised Deposit-taking Institutions (SDIs) to provide liquidity support to savings and loans and finance house companies facing temporary liquidity challenges.
Eligibility for this facility and the terms and conditions upon which it will be granted will be based strictly on the provisions of section 46A and BOG’s updated liquidity support policy framework.
It would also strengthen the capacity of the ARB Apex Bank to provide liquidity support for rural and community banks facing temporary liquidity challenges in line with a framework to be agreed.
Microfinance companies who meet eligibility criteria agreed will also qualify for this support from ARB Apex Bank.
Extend the deadline for SDIs (MFIs and RCBs) to meet new capital requirements to December 2021. This is expected to provide temporary relief given current economic conditions.
Dr Addison said the Central Bank would reduce the eight per cent primary reserve ratio for savings and loans companies, finance house companies, and rural and community banks to six per cent and the 10 per cent primary reserve ratio for micro finance companies to eight percent.
“These measures are designed to release liquidity to the SDI sector to enable them to support their customers and ensure that the MSME sector and low-income households do not lose access to critical financial services in these uncertain times,” he said.
The Bank will provide guidance to banks and SDIs on the accounting treatment of loan restructuring, classifications, provisioning, and expected credit losses, and prudential assessments of credit risk and capital ratios.
Such guidance should help banks and SDIs make quicker decisions on customers’ requests for loan restructuring.
The Bank will strictly monitor business conduct rules for banks and SDIs in their dealings with customers, particularly in relation to transparency and fairness in revisions to loan terms and conditions, fee charges, and related issues.