Ghana Negotiates $250M with World Bank to Support Financial Sector Stability
The Government of Ghana is negotiating with the World Bank for a $250 million loan to support banks impacted by the Domestic Debt Exchange Programme (DDEP) as part of the Ghana Financial Stability Project. The funds will address liquidity issues and recapitalize at least 11 financial institutions. The initiative aims to stabilize the banking sector and restore confidence among investors and depositors.
The Government of Ghana is engaged in advanced discussions with the World Bank to obtain a $250 million funding package intended to assist banks and financial institutions adversely affected by the Domestic Debt Exchange Programme (DDEP). This initiative is part of the larger Ghana Financial Stability Project aimed at providing essential capital to struggling financial entities following debt restructuring efforts. The government plans to recapitalize a minimum of 11 financial institutions throughout 2025.
In remarks made during the launch of the Ghana Association of Savings and Loans Companies’ five-year strategic plan, Mr. Andrew Amerkson, the Head of Banking and Non-Banking at the Ministry of Finance, reiterated the government’s commitment to maintaining stability within the financial sector. He represented Finance Minister Dr. Cassiel Ato Forson and highlighted proactive measures, such as the Ghana Financial Stability Fund, which allocated GH¢5.7 billion to stabilize and recapitalize bonds in the sector.
Finance Minister Dr. Forson spoke on the notable outcomes of the Ghana Financial Stability Fund A2, which successfully supported 11 financial institutions in the previous year, including four banks, four capital market operators, and three insurance companies. The upcoming $250 million loan will prioritize the recapitalization of banks and savings and loan institutions (SDIs) with the objective of enhancing security in the financial sector and restoring trust in Ghana’s banking system.
Dr. Forson indicated that this funding initiative would address liquidity challenges while ensuring that financial institutions remain resilient in their operations and can significantly contribute to economic growth. The DDEP has affected several local banks, resulting in impairment losses that have led to some becoming technically insolvent and necessitating further capital from shareholders.
As the government moves forward, it faces the urgent task of stabilizing the banking sector, rebuilding investor and depositor confidence, and ensuring the continued resilience of financial institutions amid prevailing economic difficulties. An IMF Country Report has further underscored the expectation that the World Bank, alongside other donors and the Ghanaian government, will provide GH¢1.5 billion to help strengthen capital buffers for qualifying banks.
In summary, the Government of Ghana is in discussions with the World Bank to secure a $250 million loan aimed at assisting financial institutions affected by the DDEP. This initiative is part of the Ghana Financial Stability Project, which seeks to stabilize the banking sector and restore market confidence. The government plans to recapitalize at least 11 banks and SDIs, ensuring their resilience and ability to support economic growth in the nation.
Original Source: www.ghanaweb.com
