Exempt Tier 2 and Tier 3 pension contributions from debt exchange programme — GMA

According to the association, it is instructive to note that Tier 2 and Tier 3 pensions contributions held and managed by the various pensions schemes, especially public sector pension schemes are very heavily exposed (over 90 /0) to government bonds including ESLA and Daakye bonds.

It said the cuts in bond interests, no coupon payments for 2023, and the spread of principal repayment as announced will result in a significant loss in the value of our pensions in real terms over the next 5-15 years and beyond.

The association in a statement said with a maximum bond interest of 10% starting from the 3rd year, our investments in government bonds will return a negative real return every time that inflation goes above 10%. Though the government aims for single-digit inflation in the medium to long term, historically that has been very difficult to achieve in Ghana even in the best of economic years.

It said “All these, we believe, will further worsen the already dire situation workers and pensioners will face especially when their meagre pensions have lost significant value owing to the depreciation of the cedi, and high inflation amongst others, adding that the GMA is concerned about the negative effect of the debt exchange programme on Private Health facilities, Private Health Insurance, and Mutual schemes who have invested heavily with Government of Ghana bonds. This we believe will impact negatively patient care, medication supply, and claims management.

“The GMA, having considered these, rejects the Debt Exchange Programme as announced by the Minister of Finance. We, therefore, demand as a matter of urgency that government takes immediate steps to completely exempt pensions and other related funds (including the GMA Fund which has investments in GOG instruments) and that no ‘haircuts’ should affect the principal and interests of such investments.

“Failure of exempting workers’ pension funds from ‘haircuts’ or debt restructuring may result in actions that will disrupt the industrial harmony in the country,” it added.

The government’s move is to rely on a softer payment plan with institutions and individuals who have lent money to the country as part of efforts to reduce the burden the public debt stock puts on the economy.

The plan, which is in line with the government’s commitment to restore macroeconomic stability in the shortest possible time, involves the swapping of existing domestic bonds with longer-dated bonds that will take between four and 14 years to mature in 2037.

Minister of Finance Ken Ofori-Atta announcing the programme said Ghana is facing a very challenging economic situation amid an increasingly difficult global economic environment, marked by the COVID-19 pandemic, the global economic shock created by the Russian invasion of Ukraine, and disruptions of the global supply chains.

He said for the government to alleviate the debt burden in the most transparent, efficient, and expedited manner, treatment of domestic debt is necessary adding that the invitation does not entail any reduction in the principal amount (haircut) of the eligible bonds which involves an exchange for a new government of Ghana bonds with a 0% coupon in 2023 that steps up to 5% in 2024, and 10% from 2025 onwards.