The World Bank has approved a $250 million International Development Association (IDA) credit to support the Ghana Financial Stability Project, a five-year initiative aimed at bolstering Ghana’s financial sector. This project will underpin Ghana’s Financial Sector Strengthening Strategy (FSSS) by aiding the recapitalization of banks and specialized deposit-taking institutions (SDIs) impacted by Ghana’s Domestic Debt Exchange Program (DDEP).
The financial system is integral to Ghana’s economic framework, providing essential services to households, businesses, and the government, and fostering economic growth. The severe repercussions of the DDEP on financial institutions prompted the Government of Ghana to establish the Ghana Financial Sector Stability Fund (GFSF). This fund is designed to offer solvency support to 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,” stated Robert R. Taliercio, World Bank Country Director for Ghana, Liberia, and Sierra Leone. “Through direct support to banks and SDIs, the project will benefit Ghana’s financial sector and the economy by supporting the access of depositors and other financial consumers to savings, payments, and other core financial services provided by adequately capitalized banks and SDIs.”
The Ghana Financial Stability Project is poised to offer immediate benefits to eligible undercapitalized but viable banks and SDIs and will be available to other banks and SDIs that may need support in the future due to potential new losses. It aims to provide a safeguard against unexpected financial setbacks.
“The World Bank Group’s support aims to help address short-term shocks to improve prospects for long-term sustainable development and long-term resilience against future shocks. The project promotes financial stability, a key requirement to protect people and preserve jobs,” said Carlos Leonardo Vicente, Senior Financial Specialist and Team Lead.
This initiative complements the World Bank’s Development Programme 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.
The IDA, established in 1960, assists the world’s poorest countries by providing grants and low to zero-interest credits for projects and programs that foster economic growth, reduce poverty, and improve the lives of impoverished populations. IDA is a crucial source of aid for the world’s 74 poorest countries, 39 of which are in Africa. Since its inception, IDA has provided $458 billion to 114 countries, with annual commitments averaging about $29 billion over the past three fiscal years (FY19-FY21), with approximately 70 percent allocated to Africa.
This latest approval underscores the World Bank’s continued commitment to fostering economic stability and growth in Ghana and beyond.
Source: GhanaFeed.Com
