The Government of Ghana is in advanced negotiations with the World Bank to secure a $250 million funding facility aimed at supporting banks and financial institutions that have been adversely affected by the Domestic Debt Exchange Programme (DDEP).
This initiative forms part of the government’s broader efforts to restore financial stability and strengthen the resilience of Ghana’s banking sector, which has been significantly impacted by recent economic reforms.
The DDEP, introduced as part of Ghana’s economic recovery strategy, required banks and financial institutions to exchange their existing government bonds for new ones with longer maturities and lower interest rates. While this measure was intended to help manage Ghana’s debt obligations, it placed substantial financial strain on banks, reducing their liquidity and weakening their balance sheets.
In response to these challenges, the government has been implementing various financial interventions, including the establishment of the Ghana Financial Stability Fund (GFSF). The new $250 million World Bank loan is expected to provide additional support, particularly in helping financial institutions recapitalize and strengthen their operations.
Recapitalization Plans for Affected Banks
Andrew Amerkson, the Head of Banking and Non-Banking at the Ministry of Finance, reaffirmed the government’s commitment to stabilizing the financial sector. Mr Amerkson disclosed that the government is prioritizing the recapitalization of at least eleven financial institutions in 2025. His remarks underscored the urgency of ensuring that these institutions regain financial strength and remain viable players in Ghana’s economy.
Dr. Forson, in his address, highlighted the proactive steps taken by the government to sustain the financial sector. He explained that the Ghana Financial Stability Fund, with an allocation of GHS 5.7 billion, has played a crucial role in stabilizing the financial system by providing much-needed capital to distressed institutions.
The Finance Minister further emphasized the success of the Ghana Financial Stability Fund A2, which was introduced last year and provided financial support to eleven institutions, including four banks, four capital market operators, and three insurance companies. According to him, this intervention has significantly contributed to maintaining confidence in Ghana’s financial sector.
The Role of the World Bank Funding
The proposed $250 million World Bank loan will complement these efforts as part of the Ghana Financial Stability Project. The initiative, backed by the World Bank, is designed to strengthen Ghana’s financial system by improving liquidity, stabilizing financial institutions, and ensuring that banks continue to provide essential credit to businesses and individuals.
Dr. Forson confirmed that the government has engaged the World Bank to secure this facility, which will specifically support the recapitalization of banks and savings and loans institutions. He stressed that this funding is a critical step in reinforcing the financial sector and ensuring long-term stability.
The impact of securing this funding facility is expected to be far-reaching. The financial strain caused by the DDEP has limited the ability of banks to issue new loans and support economic activities, affecting businesses and individuals alike. Ensuring that affected banks receive adequate capital injection will help restore confidence in the financial system, encourage investment, and improve access to credit.
The government believes that with stronger balance sheets, banks will be in a better position to support business expansion and job creation, ultimately contributing to economic growth and development.
Dr. Forson expressed optimism about the positive impact of the financial support on the broader economy. He noted that beyond addressing immediate liquidity concerns, the initiative is designed to ensure that banks and other financial institutions remain resilient in the face of economic uncertainties. The government’s ability to navigate these financial challenges successfully will be crucial in shaping the future of Ghana’s banking sector and maintaining overall economic stability.
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