A $250 million International Development Association (IDA) credit was authorized by the World Bank on Friday, May 31, for a five-year Ghana Financial Stability Project.
By promoting financial stability through the recapitalization of banks and specialized deposit-taking institutions (SDIs) affected by Ghana’s Domestic Debt Exchange Program (DDEP), the initiative would assist the country’s Financial Sector Strengthening Strategy (FSSS).
The financial system is essential to the operation of the Ghanaian economy since it fosters economic growth and offers vital services to individuals, businesses, and the government. The Ghana Financial Sector Stability Fund (GFSF) was created by the government to offer solvency support to banks, pension funds, insurance companies, fund managers, and collective investment firms in response to the devastating effects of the DDEP on financial institutions.
“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.
“Through direct support to banks and SDI, 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 expected to immediately benefit eligible undercapitalized but viable banks and SDIs and become accessible to other banks and SDIs that may need support in the future due to potential new losses and provide a backstop against unexpected losses.
“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.
The project complements the World Bank’s Development Programme Financing series and the IMF-Extended Credit Facility, which support reforms to improve the macroeconomic environment and enable financial institutions to operate profitably and generate internal capital.
It also complements 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, helps 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 poor people’s lives.
IDA is one of the largest sources of assistance for the world’s 74 poorest countries, 39 of which are in Africa. Resources from IDA bring positive change to the 1.3 billion people who live in IDA countries.
Since 1960, IDA has provided $458 billion to 114 countries. Annual commitments have averaged about $29 billion over the last three years (FY19-FY21), with about 70 percent going to Africa.
