The Ghanaian government is negotiating with the World Bank for a $250 million loan to support banks affected by the Domestic Debt Exchange Programme (DDEP). The funding aims to recapitalize financial institutions and is part of the Ghana Financial Stability Project. Previous interventions have helped stabilize the sector, and this loan is seen as vital for restoring investor confidence amid ongoing economic challenges.
The Government of Ghana is engaged in advanced discussions with the World Bank to secure a funding facility of $250 million directed towards aiding banks and financial institutions affected by the Domestic Debt Exchange Programme (DDEP). This financial support is a critical component of the Ghana Financial Stability Project, aiming to stabilize the post-debt restructuring environment for impacted institutions.
This initiative targets the recapitalization of at least 11 financial institutions in the year 2025. Andrew Amerkson, who leads the Banking and Non-Banking sector at the Ministry of Finance, emphasized the government’s dedication to ensuring sector stability during the launch of the Ghana Association of Savings and Loans Companies’ strategic plan.
The government has previously allocated GH¢5.7 billion through the Ghana Financial Stability Fund to support financial institutions. Dr. Cassiel Ato Forson, the Finance Minister, reported notable successes from the Fund A2 initiative, which assisted 11 financial institutions, including four banks, four capital market operators, and three insurance companies over the last year.
The forthcoming $250 million loan aims to bolster the capitalization of banks and savings and loan institutions, thereby enhancing the overall stability of Ghana’s financial sector. Dr. Forson noted that this funding is essential not only for addressing liquidity issues but also for reinforcing the liquidity and resilience of financial institutions, enabling them to effectively contribute to economic growth.
The DDEP has resulted in impairment losses for many local banks, causing some to become technically insolvent and necessitating further capital infusions from shareholders. To maintain adequate capitalization, financial institutions are expected to fully engage with the Ghana Financial Stability Fund.
An IMF Country Report (23/168) indicated that the World Bank, alongside other donors and the Ghanaian government, is expected to provide GH¢1.5 billion to assist qualifying banks in building capital buffers. This action is part of the government’s strategic efforts to stabilize the banking sector, restore confidence among investors and depositors, and ensure the resilience of financial institutions during challenging economic conditions.
In summary, the Government of Ghana is proactively addressing the challenges faced by its banking sector following the implementation of the DDEP. By negotiating a $250 million funding facility with the World Bank, the government aims to recapitalize financial institutions and restore stability. The emphasis on collaboration with the Ghana Financial Stability Fund reflects a commitment to strengthening the resilience of local banks and enhancing investor confidence.
Original Source: www.ghanaweb.com
