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The World Bank has sanctioned a $250 million loan from the International Development Association (IDA) to support a five-year initiative designed to enhance Ghana’s financial stability.
The Ghana Financial Stability Project is set to reinforce the country’s Financial Sector Strengthening Strategy (FSSS) by providing critical support to banks and Specialized Deposit-taking Institutions (SDIs) affected by Ghana’s Domestic Debt Exchange Program (DDEP).
The financial sector is crucial to Ghana’s economy, offering essential services to households, businesses, and the government, thereby driving economic growth.
To counter the severe impacts of the DDEP on financial institutions, the Ghanaian government established the Ghana Financial Sector Stability Fund (GFSF).
This fund aims to provide 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 aiding banks and SDIs, the project will strengthen Ghana’s financial sector and economy, ensuring depositors and other financial consumers have access to savings, payments, and other essential financial services offered by well-capitalized banks and SDIs.”
Dr. Mohammed Amin Adam, Minister of Finance, stated that the Ghana Financial Stability Project is poised to immediately assist 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, thus providing a safeguard against unexpected financial shocks.
Carlos Leonardo Vicente, Senior Financial Specialist and Team Lead, highlighted the project’s long-term benefits: “The World Bank Group’s support aims to address short-term shocks and improve prospects for sustainable development and resilience against future shocks. The project promotes financial stability, a key requirement for protecting people and preserving jobs.”
This initiative complements the World Bank’s Development Programme Financing series and the IMF-Extended Credit Facility, which aim to enhance the macroeconomic environment and enable financial institutions to operate profitably and generate internal capital.
Additionally, it 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.
