World Bank greenlights $250M credit facility for Ghana

The World Bank approved a $250 million International Development Association (IDA) credit for Ghana’s five-year Financial Stability Project.

This initiative aims to support Ghana’s Financial Sector Strengthening Strategy (FSSS) by bolstering financial stability through the recapitalization of viable banks and Specialized Deposit-taking Institutions (SDIs) impacted by Ghana’s Domestic Debt Exchange Program (DDEP).

The financial system is crucial for the Ghanaian economy, providing essential services to households, firms, and the government, thereby supporting economic growth. To mitigate the severe impact of the DDEP on financial institutions, the Government established the Ghana Financial Sector Stability Fund (GFSF).

This fund provides 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,” 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 by ensuring that depositors and other financial consumers continue to 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 benefit eligible undercapitalized yet viable banks and SDIs. It will also become accessible to other banks and SDIs that may need support in the future due to potential new losses, providing a safeguard against unexpected financial setbacks.

Senior Financial Specialist and Team Lead, Carlos Leonardo Vicente said, “The World Bank Group’s support aims to help address short-term shocks and improve prospects for long-term sustainable development and resilience against future shocks. The project promotes financial stability, a key requirement to protect people and preserve jobs,”

This project complements the World Bank’s Development Programme Financing series and the IMF-Extended Credit Facility, both of which support reforms to improve the macroeconomic environment and enable 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 World Bank’s International Development Association (IDA), established in 1960, assists the world’s poorest countries by providing grants and low to zero-interest credits for projects and programs that boost economic growth, reduce poverty, and improve lives. IDA is one of the largest sources of assistance for the world’s 74 poorest countries, 39 of which are in Africa, positively impacting the 1.3 billion people living in IDA countries.

Since 1960, IDA has provided $458 billion to 114 countries, with annual commitments averaging about $29 billion over the last three years (FY19-FY21), with about 70 percent directed to Africa.