The World Bank has sanctioned a $250 million credit from the International Development Association (IDA) for the five-year Ghana Financial Stability Project.
This initiative will bolster Ghana’s Financial Sector Strengthening Strategy (FSSS) by enhancing financial stability through the recapitalization of viable banks and Specialized Deposit-taking Institutions (SDIs) affected by Ghana’s Domestic Debt Exchange Program (DDEP).
The financial system is vital to the Ghanaian economy, offering essential services to households, businesses, and the government, and facilitating economic growth.
To mitigate the severe impacts of the Domestic Debt Exchange Program (DDEP) on financial institutions, the government established the Ghana Financial Sector Stability Fund (GFSF) 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 providing 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 the economy, ensuring depositors and other financial consumers have access to savings, payments, and other core financial services from adequately capitalized banks and SDIs.”
The Ghana Financial Stability Project is expected to immediately assist eligible undercapitalized but viable banks and SDIs and will be available to other banks and SDIs that may require support in the future due to potential new losses, thus providing a safety net against unexpected financial setbacks.
“The World Bank Group’s support aims to mitigate short-term shocks and improve prospects for long-term sustainable development and resilience against future challenges. The project promotes financial stability, crucial for protecting individuals and preserving jobs,” said Carlos Leonardo Vicente, Senior Financial Specialist and Team Lead.
The project complements the World Bank’s Development Program Financing series and the IMF-Extended Credit Facility, which support reforms to enhance the macroeconomic environment, enabling 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.