The World Bank has approved a $250 million International Development Association (IDA) credit to support Ghana’s five-year Financial Stability Project. This initiative is designed to enhance financial stability in Ghana by aiding the recapitalization of viable banks and Specialized Deposit-taking Institutions (SDIs) affected by Ghana’s Domestic Debt Exchange Program (DDEP).
The financial sector plays a vital role in Ghana’s economy by offering essential services to households, businesses, and the government, thus fostering economic growth. To counteract the significant impact of the DDEP on financial institutions, the Ghanaian government established the Ghana Financial Sector Stability Fund (GFSF). This fund offers 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 aims to immediately assist eligible undercapitalized yet viable banks and SDIs. It will also extend support to other banks and SDIs that might face future financial challenges, acting as a safeguard against unforeseen financial setbacks.
Carlos Leonardo Vicente, Senior Financial Specialist and Team Lead, emphasized, “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 initiative complements the World Bank’s Development Programme Financing series and the IMF-Extended Credit Facility, both of which support reforms 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 to provide 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 drive economic growth, reduce poverty, and improve lives. As one of the largest sources of assistance for the world’s 74 poorest countries, 39 of which are in Africa, IDA has significantly impacted the lives of 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, with approximately 70 percent directed to Africa.
