Aware of the DDEP’s potential impact on the financial sector, steps are being taken to mitigate that impact by establishing the Ghana Financial Stability Fund to, among others, provide solvency and liquidity support to eligible financial sector institutions.
The Financial Stability Fund (FSF) is finally set to come into play with a US$750million disbursement from the Ministry of Finance.
The amount, which translates to approximately GH¢9billion or 60 percent of the aspirational GH¢15billion, is expected to provide solvency and liquidity support to eligible financial sector institutions affected by – and who fully participated in – the domestic debt exchange programme (DDEP).
Minister of State responsible for Finance, Dr. Amin Adams, at a cooperation agreement signing ceremony between government and the United Nations (UN) in Accra, said government is aware of the DDEP’s potential impact on the financial sector and is taking necessary measures to mitigate any negative outcomes.
Dr. Adams did not mince words when he stated that the DDEP will come with some challenges but once it is well-managed, it will bring more stability to the economy and enhance our debt-management capabilities as a country.
“The Ghana Financial Stability Fund will also give the needed assurance to development partners, foreign investors and stakeholders alike that the financial sector is stable and secure,” added Dr. Adams.
“Government is immediately committing US$750million to the solvency fund, and this includes US$250million as a loan from the World Bank,” Dr. Adams said as he called on other development partners to support efforts regarding the fund.
The development will come as a source of relief to stakeholders in the financial sector as the local debt restructuring programme has taken a toll on the sector, with recent earning statements of banks showing the impact of mark-to-market losses on investments, higher impairments on investment securities, loans and rising operating costs.
Banking consultant Dr. Richmond Atuahene believes the FSF has come at a crucial time, adding that it will calm the nerves of non-bank financial institutions.
“We must remember that the fund is meant to cater to a number of financial sector institutions, and these include fund managers and other capital market players which are also feeling the strain of recent happenings,” he added.
