Ghana secures $250 million from World Bank to bolster financial sector

The World Bank has approved a $250 million credit from the International Development Association (IDA) for a five-year project aimed at fortifying Ghana’s financial stability.

The Ghana Financial Stability Project is designed to bolster the country’s Financial Sector Strengthening Strategy (FSSS) by providing essential support to banks and Specialized Deposit-taking Institutions (SDIs) impacted by Ghana’s Domestic Debt Exchange Program (DDEP).

The financial sector plays a vital role in Ghana’s economy, offering crucial services to households, businesses, and the government, thereby supporting economic growth.

To mitigate the severe effects 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 contribute to Ghana’s financial stability by providing solvency support to banks and SDIs affected by the DDEP through the GFSF,” stated 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 economy, ensuring depositors and other financial consumers have access to savings, payments, and other essential financial services offered by well-capitalized banks and SDIs.”

The Ghana Financial Stability Project is set to immediately assist undercapitalized yet viable banks and SDIs.

It will also be available to other financial institutions that may require 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, emphasized 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.