African central banks join global forces to buffer COVID-19 impact


by Xinhua Writer Ding Lei

The Central Bank of Kenya (CBK) on Wednesday advised commercial banks to provide relief to borrowers, and the Central Bank of Nigeria (CBN) earlier this week announced the creation of a 50 billion naira (136 million U.S. dollars) targeted credit facility as major African monetary authorities joined forces to help alleviate adverse economic effects of the novel coronavirus (COVID-19) outbreak.

The moves came as a growing number of COVID-19 cases have been confirmed in the Sub-Saharan African region where more than 20 countries have ramped up their measures to contain the virus.

On Wednesday, the CBK issued a set of emergency measures, including extending personal loan repayment by up to 12 months and restructuring of corporate borrowers’ lending, given the liquidity crunch linked to COVID-19 disruptions.

Patrick Njoroge, Governor of CBK, said at a press briefing on Wednesday that the pandemic is expected to slow down economic growth in the country hence the need for timely roll-out of mitigation measures.

“We do not want this health crisis to become an economic crisis and have taken swift measures to reduce adverse impacts,” said Njoroge.

In Nigeria, Africa’s largest economy, the central bank said it has created a 50 billion naira fund for households and small-and medium-sized enterprises (SMEs) that have been particularly hard hit by the coronavirus, such as hoteliers, airline service providers and health care merchants.

The CBN also reduced interest rates on all its intervention funds to 5 percent from 9 percent for one year, effective from March 1.

In South Africa where it is already on a technical recession, the country has seen the sharpest rise in COVID-19 cases among Sub-Saharan African countries. As of Wednesday, the number of confirmed coronavirus cases in South Africa jumped to 116.

Economists have described the outbreak as a “crisis” that would negatively impact the economy. “Port congestion at Durban (the third populous city in South Africa) and other locations meant that many businesses were forced to limit activity, with exports to China also decreasing,” said David Owen, economist with London-based global information provider IHS Markit.

Lesetja Kganyago, Governor of South African Reserve Bank (SARB), said earlier this month during a public lecture that “monetary policy alone cannot turn this economy around. As GDP figures reminded us, the supply-side of this economy is in deep trouble.”

Kganyago added the scope for monetary policy is limited now by the fact that inflation has stayed relatively high.

Data from Statistics South Africa showed Wednesday that South Africa’s headline consumer price inflation quickened to 4.6 percent year-on-year in February, inching past the 4.5 percent midpoint of SARB’s monetary policy target range.

According to the agency, the last time the inflation rate was above the midpoint was in November 2018 when the rate was 5.2 percent.

Jannie Rossouw, head of School of Economic and Business Sciences at the University of the Witwatersran, told Xinhua that South Africa’s inflation rate will be 4.5 percent for this year and the country will go into a recession in 2020 with a negative growth rate of 0.5 percent and 1 percent.

In Ghana, the Bank of Ghana last week announced to reschedule its bimonthly Monetary Policy Committee meeting from March 24-27 to March 18-20. The regulator said on Monday that it has been following the developments of COVID-19 pandemic and is taking necessary steps to mitigate the impact of the virus on domestic economy in order to ensure financial and economic stability.

In a week, a group of central banks in Sub-Saharan Africa including South Africa, Nigeria, Angola, Kenya and Ghana are expected to announce their decisions on monetary policies following their first Monetary Policy Committee meetings after the coronavirus pandemic.

Gerrishon Ikiara, senior economics lecturer at the University of Nairobi, told Xinhua that Kenya’s central bank has been effective in creating a stable policy environment for managing and influencing key macro-economic aggregates in the country over the years.

“The coronavirus introduces new dynamics and uncertainties which the Monetary Policy Committee is unlikely to be able to control until the virus is under control globally for the normal management of the individual economies to resume. Thus, individual country institutions like Kenya’s Monetary Policy Committee will only be able to effectively play their roles at the national level when the normalcy of the global economic order is re-established after the coronavirus crisis is conclusively dealt with”, said the economist. Enditem

(Xinhua reporter Jing Jing in Johannesburg also contributed to the story.)

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