The Ghanaian government is negotiating with the World Bank for a $250 million aid package to support banks affected by the Domestic Debt Exchange Programme. This funding is part of the Ghana Financial Stability Project, aimed at enhancing the resilience of financial institutions and restoring confidence in the banking sector.
The Government of Ghana is engaged in advanced discussions with the World Bank to secure a significant funding facility of $250 million intended to assist banks and financial institutions adversely affected by the Domestic Debt Exchange Programme (DDEP). This initiative is integral to the broader Ghana Financial Stability Project aimed at bolstering the resilience of local banks following substantial debt restructuring.
The initiative’s primary objective is to provide vital capital to at least 11 financial institutions in 2025. At a recent event, Andrew Amerkson, Head of Banking and Non-Banking at the Ministry of Finance, reinforced the government’s commitment to maintaining financial sector stability.
On behalf of Finance Minister Dr. Cassiel Ato Forson, Mr. Amerkson highlighted the proactive strategies in place, which include a significant allocation of GH¢5.7 billion from the Ghana Financial Stability Fund aimed at stabilizing and recapitalizing struggling financial institutions.
Dr. Ato Forson pointed out the previous success of the Ghana Financial Stability Fund A2, which had effectively supported 11 institutions last year, comprising 4 banks, 4 capital market operators, and 3 insurance entities. He articulated the necessity for the upcoming $250 million loan to enhance both liquidity and resilience within the country’s banking system.
The impairments stemming from the DDEP have led to a situation where several local banks are struggling with technical insolvency, thus necessitating additional capital input from shareholders. The Ghana Financial Stability Fund mandates that these institutions fully participate to secure needed support.
An IMF Country Report indicated collaboration among the World Bank, donors, and the Ghanaian government to provide GH¢1.5 billion to strengthen capital buffers for qualifying banks. Consequently, the government is undertaking these measures at a pivotal juncture to ensure the banking sector’s stabilization and restore confidence among investors and depositors amidst existing economic challenges.
In summary, the Government of Ghana is seeking $250 million from the World Bank to assist banks impacted by the Domestic Debt Exchange Programme. This initiative is part of a broader strategy to stabilize the financial sector and restore investor confidence. With targeted recapitalization efforts, the government aims to fortify the banking system against ongoing economic vulnerabilities.
Original Source: www.ghanaweb.com
