The World Bank has approved a $250 million International Development Association (IDA) credit for Ghana’s Financial Stability Project, spanning five years.
This initiative aligns with Ghana’s Financial Sector Strengthening Strategy (FSSS), aiming to reinforce financial stability by recapitalizing viable banks and Specialized Deposit-taking Institutions (SDIs) adversely affected by the Domestic Debt Exchange Program (DDEP).
Recognizing the pivotal role of the financial system in underpinning the Ghanaian economy, the project seeks to mitigate the severe impacts of the DDEP. The Ghanaian government has thus established the Ghana Financial Sector Stability Fund (GFSF) to provide solvency support to various financial entities, including banks, pension funds, insurance companies, fund managers, and collective investment schemes.
“This project will contribute to Ghana’s financial stability by providing solvency support to banks and SDIs impacted by the DDEP through the GFSF,” remarked Robert R. Taliercio, World Bank Country Director for Ghana, Liberia, and Sierra Leone. He emphasized that by directly supporting these financial institutions, the initiative will enhance depositor access and other core financial services essential for economic growth.
The Ghana Financial Stability Project is poised to immediately aid undercapitalized yet viable banks and SDIs, while also remaining accessible to other institutions facing new potential losses. This creates a buffer against unforeseen financial shocks.
Carlos Leonardo Vicente, Senior Financial Specialist and Team Lead, highlighted the broader objective saying; “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, crucial for protecting people and preserving jobs.”
This project complements the World Bank’s broader Development Program Financing series and the IMF-Extended Credit Facility, both of which aim to enhance the macroeconomic environment and ensure the profitability and capital generation of financial institutions.
Additionally, it aligns with other World Bank-funded initiatives focused on economic recovery and job creation in Ghana, such as the Ghana Development Financing Project, which facilitated the establishment of the Development Bank of Ghana and provides long-term financing to SMEs and small corporates.
Norvanreports