Ghana is in talks with the World Bank for $250 million to support banks affected by the Domestic Debt Exchange Programme. The funding aims to stabilize the financial sector and recapitalize struggling institutions in 2025, following previous successful interventions. The government is committed to restoring investor confidence and ensuring financial resilience.
The Government of Ghana is engaged in advanced discussions with the World Bank to secure a significant funding facility of $250 million. This financial support is intended to assist banks and financial institutions that have been adversely affected by the Domestic Debt Exchange Programme (DDEP). The initiative is part of the wider Ghana Financial Stability Project, aiming to restore normalcy in the banking sector.
This funding initiative is designed to provide essential capital to financial institutions that are grappling with challenges following the recent debt restructuring. The government’s objective is to recapitalize at least 11 financial institutions in the year 2025, thereby reinforcing their financial base and stability.
During the launch of the Ghana Association of Savings and Loans Companies’ strategic plan, Andrew Amerkson, the Head of Banking and Non-Banking at the Ministry of Finance, articulated the government’s commitment to ensuring stability within the financial sector. He represented Finance Minister Dr. Cassiel Ato Forson, outlining proactive measures including the use of the Ghana Financial Stability Fund, which allocated GH¢5.7 billion to stabilize the financial infrastructure.
Dr. Forson acknowledged the successes of previous interventions through the Ghana Financial Stability Fund A2, which provided essential support to eleven financial institutions, comprising four banks, four capital market operators, and three insurance companies last year. These initiatives have played a pivotal role in maintaining economic stability.
The forthcoming $250 million loan is set to bolster the capital of banks and savings and loans institutions, thereby enhancing overall stability in Ghana’s financial sector. Dr. Forson emphasized that this funding is not only responsive to liquidity challenges but also vital for the resilience of financial institutions, enabling them to contribute more effectively to economic growth.
The impact of the DDEP has left some local banks technically insolvent, necessitating additional capital support from shareholders and full engagement in the Ghana Financial Stability Fund. An IMF Country Report indicated collaboration among the World Bank, other donors, and the Ghanaian government to establish a GH¢1.5 billion fund to build capital buffers for qualifying banks.
As the government embarks on this pivotal initiative, it faces the crucial task of stabilizing the banking sector. This effort is aimed at restoring confidence among investors and depositors, as well as ensuring financial institutions are resilient amidst ongoing economic difficulties.
In summary, Ghana is negotiating $250 million with the World Bank to support its financial institutions impacted by the DDEP. This funding is part of a broader initiative aimed at financial stability and is crucial for recapitalizing key banks and restoring confidence in the sector. The government’s ongoing commitment to financial stability is underscored by its previous successes and proactive measures to address liquidity challenges.
Original Source: www.ghanaweb.com
