The World Bank has approved a $250 million credit from the International Development Association (IDA) to support Ghana’s Financial Stability Project.
This five-year initiative aims to fortify Ghana’s financial sector by aiding the recapitalization of banks and Specialized Deposit-taking Institutions (SDIs) affected by the Domestic Debt Exchange Program (DDEP).
Ghana’s financial system plays a crucial role in its economy, providing essential services to households, businesses, and the government, and driving economic growth. To mitigate the significant impact of the DDEP on financial institutions, the Ghanaian government established the Ghana Financial Sector Stability Fund (GFSF). This fund offers solvency support to banks, pension funds, insurance companies, fund managers, and collective investment schemes.
“This project will enhance Ghana’s financial stability by offering solvency support to banks and SDIs impacted by the DDEP through the GFSF,” said Robert R. Taliercio, World Bank Country Director for Ghana, Liberia, and Sierra Leone. “By directly supporting banks and SDIs, the project will benefit Ghana’s financial sector and economy, ensuring that depositors and other financial consumers have access to savings, payments, and other core financial services from adequately capitalized institutions.”
The Ghana Financial Stability Project will immediately benefit eligible undercapitalized but viable banks and SDIs. It will also be available to other financial institutions that may need support in the future due to potential new losses, providing a safeguard against unexpected financial challenges.
“The World Bank Group’s support aims to address short-term shocks and improve prospects for long-term sustainable development and resilience against future shocks. The project promotes financial stability, which is essential to protect people and preserve jobs,” said Carlos Leonardo Vicente, Senior Financial Specialist and Team Lead.
This project complements the World Bank’s Development Program Financing series and the IMF-Extended Credit Facility, which support reforms to enhance the macroeconomic environment, allowing financial institutions to operate profitably and generate internal capital. It also aligns with other World Bank-funded projects aimed at economic recovery and job creation in Ghana, such as the Ghana Development Financing Project, which supported the establishment of the Development Bank of Ghana and provides long-term financing to small and medium enterprises and small corporates.
About the International Development Association (IDA): Established in 1960, the IDA assists the world’s poorest countries by providing grants and low to zero-interest credits for projects and programs that promote economic growth, reduce poverty, and improve living conditions. The IDA is one of the largest sources of assistance for the world’s 74 poorest countries, 39 of which are in Africa. Since 1960, the IDA has provided $458 billion to 114 countries, with annual commitments averaging about $29 billion over the last three years (FY19-FY21), and approximately 70 percent of these funds going to Africa.
Source: News Ghana
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