Ghana is restricting private pension fund managers from investing offshore amid concerns that such moves could exacerbate pressure on the country’s struggling cedi.
Why it matters
- Ghana’s pension fund industry has flourished since reforms in 2010, with assets under management reaching 78.2 billion Ghanaian cedis ($4.93 billion) in June. Private firms manage over 73% of these funds.
- Despite laws allowing up to 5% of pension assets to be invested abroad, fund managers claim regulatory hurdles are stifling efforts to diversify amid local economic challenges.
Driving the news
- Some private pension funds ventured into offshore investments earlier this year but were blocked by the National Pensions Regulatory Authority (NPRA).
- “They threatened to sanction us, but we didn’t find any legal basis,” a source at a private fund management firm said.
- The NPRA insists government approval is required before offshore investments can proceed, with ongoing discussions aimed at clarifying the rules.
Between the lines
- Ghana is navigating a complex debt-restructuring process after defaulting on most of its $30 billion international debt in 2022.
- The cedi has already depreciated 25% this year, compounding challenges for fund managers seeking value for contributors amid high inflation.
What they’re saying
- Private fund managers argue the restrictions are overly cautious and hinder growth opportunities.
- “Pension funds globally chase value, but they want us to chase inflation,” an executive at a leading firm said.
- The finance ministry acknowledges the tension but emphasizes the need to protect domestic liquidity and the economy.
Zoom out
Private fund managers are calling for reforms to unlock offshore investments, pointing out the contradiction of allowing foreign pension funds to invest locally while preventing similar moves abroad. Until then, they face tight limits in a volatile economic environment.
Source: Zawya
