Finance Minister, Ken Ofori-Atta

The Institute of Economic Affairs (IEA) has made a number of recommendations as government and the Bank of Ghana (BoG) collaborate to mitigate the impact of Covid-19 on businesses and economy.

The Institute lauded government’s mobilisation of ¢1 billion stimulus package to support small businesses.

It said the initiative was important as that will prevent “these businesses that constitute the backbone of the economy from going down and taking with them many households and livelihoods.

“Our wish is that the National Board for Small-Scale Industries (NBSSI) will administer the package fairly and judiciously for the maximum benefit of the affected businesses, while also calling on the businesses to use the funds prudently and productively.” 

The IEA noted the emergency spending occasioned by the pandemic which will render the 5% fiscal deficit ceiling in the Fiscal Responsibility Act (FRA) unattainable.

“The Minister of Finance is, therefore, right in indicating his intention to seek Parliamentary approval to exceed the ceiling, at least this year. When the crisis or emergency is over, the ceiling can be accordingly reinstated,” it said. 

The Institute urged the central bak to ensure that the numerous measures it announced and put in place do not remain mere paper directives, but that they are strictly enforced and observed by banks and other financial institutions.

“For instance, we know that banks invariably show inertia in responding to policy rate adjustments, particularly in the downward direction. The BoG also expressed concern about the possibility of banks using the extra liquidity freed up for them to buy Treasury Bills rather than lending it to the private sector.

“Therefore, to make the monetary policy rate cut effective and also ensure that banks lend their freed-up reserves to the private sector, the BoG should, as of necessity, follow up with a strong directive to banks to act accordingly.

“We are even calling on the Bank to set up a multi-stakeholder committee, comprising representatives from the Bank of Ghana, Ministry of Finance, Ghana Bankers Association, Association of Ghana Industries and civil society to enforce the BoG measures,” IEA said.