Ghana’s authorities have moved to block private pension funds from investing in offshore assets, citing fears of further weakening the already volatile cedi currency, industry sources revealed.
Pension reforms introduced in 2010 spurred substantial growth in the sector, bolstered by a tiered contribution system. This framework allows private firms to manage a portion of workers’ retirement contributions.
Currently, private fund managers oversee about 73% of the pension sector’s 78.2 billion cedis ($4.93 billion) assets. Despite legal provisions permitting up to 5% of assets to be invested abroad, efforts to pursue offshore diversification have faced regulatory pushback.
Private fund managers argue that offshore investments offer value amid high inflation and the cedi’s 25% depreciation this year. The regulator, however, reportedly stopped some managers from expanding their international portfolios, citing the need for government approval.
John Kwaning Mbroh, head of Ghana’s National Pensions Regulatory Authority (NPRA), confirmed ongoing discussions to clarify offshore investment rules but emphasized the need for safeguards to protect liquidity.
Ghana is navigating the aftermath of a major debt restructuring and grappling with the economic fallout of its 2022 international debt default. Amidst these challenges, the government is keen to prevent offshore investments from exacerbating domestic liquidity strains.
Private pension firms remain critical of the policy, labeling it overly cautious. They argue it restricts opportunities to create value while allowing foreign pension funds to invest freely in Ghana’s market.
“The world over, pension funds chase value, but they want us to chase inflation,” said an executive at a top fund management firm.
As Ghana’s economic recovery unfolds, the tug-of-war between economic stability and investment growth continues to shape the future of pension fund management.
