Ghana’s decision to ban pension funds from investing in foreign markets has sparked intense debate, with executives arguing that the restriction is counterproductive and limits their ability to hedge risks and diversify portfolios. The ban, implemented to reduce pressure on the cedi currency, has raised concerns about the long-term growth and diversification of Ghana’s pension fund industry.
Impact on Pension Funds
– Limited Diversification: Pension fund managers say the ban restricts their ability to invest in foreign assets, making it challenging to manage risks and achieve returns.
– Currency Concerns: The ban aims to stabilize the cedi, but executives argue it may ultimately harm the currency by limiting investment opportunities.
– Regional Comparison: Countries like Kenya, South Africa, and Botswana allow pension funds to invest in foreign markets, achieving greater stability in their foreign exchange rates.
Industry Response
– Industry Lobby: The Chamber of Pension Trustees of Ghana is pushing for the ban to be lifted, citing the need for geographic diversification in pension fund management.
– Pension Fund Growth: Despite the ban, Ghana’s pension assets grew to 86.23 billion Ghanaian cedi ($6.93 billion) at the end of 2024, up from 61.8 billion cedi in 2023.
Government’s Stance
– Economic Stability: The government prioritizes protecting domestic liquidity and stabilizing the cedi, which depreciated by 25% against the US dollar this year.
– Regulatory Discussions: The National Pensions Regulatory Authority (NPRA) is engaging with industry stakeholders to clarify rules and valuation criteria for offshore investments.