The World Bank has pledged $250 million to support Ghana's financial sector stability through a five-year project.
In a statement, the World Bank said the loan, approved on May 30, 2024, will be provided by the International Development Association (IDA), a World Bank arm dedicated to assisting low-income countries.
This project aligns with Ghana's Financial Sector Strengthening Strategy (FSSS) and aims to address the impact of the country's Domestic Debt Exchange Programme (DDEP) on banks and financial institutions.
The project will support the FSSS by contributing to financial stability through the recapitalization of viable Banks and Specialized Deposit-taking Institutions (SDIs) impacted by the DDEP.
"The financial system is the lifeblood of Ghana's economy," said Robert R. Taliercio, World Bank Country Director for Ghana, Liberia, and Sierra Leone. "This project will strengthen financial stability by providing solvency support to banks and institutions affected by the DDEP, ensuring continued access to essential financial services for Ghanaians."
The funds will be channelled through the Ghana Financial Sector Stability Fund (GFSF), established by the government to support struggling institutions. This project prioritizes immediate assistance to eligible undercapitalized banks and financial institutions, with provisions for future support if needed.
"The World Bank's support aims to mitigate short-term shocks and promote long-term resilience in Ghana's financial sector," explained Carlos Leonardo Vicente, Senior Financial Specialist and Team Lead for the project. "Financial stability is crucial for protecting Ghanaians and preserving jobs."
This initiative complements other World Bank programs in Ghana, including the Development Policy Financing series and the IMF's Extended Credit Facility. These programmes focus on broader economic reforms and enabling financial institutions to operate profitably. The World Bank also supports projects focused on economic recovery and job creation, such as the Ghana Development Financing Project.
The World Bank's International Development Association (IDA) has a long history of assisting low-income countries. Since its inception in 1960, IDA has provided financial assistance to 114 countries, with a particular focus on Africa.
Read the entire World Bank statement below;
World Bank Supports Ghana to Strengthen its Financial Sector
WASHINGTON, May 30th, 2024 – The World Bank today approved a $250 million International Development Association (IDA)* credit for a five-year Ghana Financial Stability Project. The project will support Ghana’s Financial Sector Strengthening Strategy (FSSS) by contributing to 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 critical to the functioning of the Ghanaian economy, providing critical services to households, firms, government, and supporting economic growth. To address the severe impact of the DDEP on financial institutions, the Government established the Ghana Financial Sector Stability Fund (GFSF) 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 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 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 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 providing 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 Program 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. Learn more online: IDA.worldbank.org.
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