In the wake of the COVID-19 pandemic, global monetary policy authorities have launched several expansionary programs, to cushion the virus’ negative economic effect on growth.
African economies were no different, as the pandemic posed a threat to decades of economic growth, which was formerly buoyed by capital inflows, favourable commodity prices and large aggregate demand.
According to United Capital report, the massive flood of monetary stimulus in developed markets created room for African economies to trim policy rates, amid the implication on foreign fund flows.
This included notable regional economic giants; Egypt (-300bps), South Africa (-275bps), Ghana (-150bps), Kenya (-150bps) and Nigeria (-100bps).
Also, the Central Bank of Egypt approved an EGP100.0 billion package, to cover lending at preferential rates to the manufacturing, agriculture, and contracting loans. Similarly, the Central Bank of Nigeria launched a N1.1 trillion intervention fund to the manufacturing and healthcare sectors. Elsewhere, the Central Bank of Kenya lowered banks’ cash reserve ratio by 100 bps to 4.25 per cent.
For the rest of the year, the current expansionary stance of African monetary authorities is unlikely to change. As a result, we expect policy decisions to be focused on guiding economies into recovery, as different countries lift restrictions and lockdowns placed due to the pandemic.