Prez Akufo-Addo assures Organised Labour of Gov’t’s commitment to protect pension funds
President Nana Akufo-Addo, has sought to reassure organised labour that their pension funds are safe as the government continues its Domestic Debt Exchange Programme (DDEP), which is aimed at securing an International Monetary Fund (IMF) deal. Speaking at the International Labour Day parade in May 2023, the President acknowledged the potential impact of the Programme on workers and emphasised that the government is working to explore other beneficial options within debt sustainability limits, in cooperation with both Government and Organised Labour.
The President noted that the government is committed to protecting workers’ pensions and will not act in any way to short-change them. He suggested that diversifying pension fund portfolios from the current 70% invested in government paper to real sector investments, such as rail, housing, urban transportation, motorways, and airports, as is done by other pension funds globally, could be a beneficial option.
In April, the Finance Minister, Ken Ofori-Atta, had urged the Board of Trustees of pension funds to allow for pension funds to be included in the government’s proposed debt restructuring offer. However, the request was met with opposition from many Ghanaians, including organised labour. The Ghana National Association of Teachers (GNAT) reiterated its agreement with the government for their pensions to be exempted from the Programme.
Speaking at the May Day parade, the Secretary General of the Trades Union Congress (TUC), Dr Yaw Baah, warned the government not to go back on its promise to exclude pensioners from the Domestic Debt Exchange Programme. He highlighted the importance of protecting pension funds and warned of the consequences of defaulting in the payment of public debts, which could be severe.
However, President Akufo-Addo appealed to organised labour to work closely with the government to address Ghana’s economic challenges and provide a stronger base for rapid growth and development. He emphasised that participation in the Domestic Debt Exchange Programme, while voluntary, was critical for the protection of the economy and the enhancement of Ghana’s capacity to service its public debts effectively and create fiscal space for growth and development.
The President’s reassurances come amidst ongoing concerns about Ghana’s debt sustainability and ability to service its debts, which have been exacerbated by the Covid-19 pandemic. In March 2023, the IMF noted in its Article IV consultation report that Ghana’s debt-to-GDP ratio had risen to 84.5% in 2022, and the country’s fiscal deficit had widened to 10.8% of GDP, driven by Covid-19 related spending. The report also highlighted the need for the government to implement structural reforms, including revenue mobilisation and expenditure rationalisation, to ensure debt sustainability.
In this context, the government’s Domestic Debt Exchange Programme is seen as a critical step towards securing an IMF deal and restoring debt sustainability. The Programme aims to restructure domestic debts by offering bondholders the option to exchange their existing bonds for new bonds with longer maturities, lower coupon rates, and bullet payments at maturity. The government hopes that the Programme will reduce the refinancing risks associated with its domestic debt portfolio and create fiscal space for growth-enhancing expenditures.
However, the Programme has faced opposition from various stakeholders, including bondholders and organised labour, who have raised concerns about the potential impact on their investments and pensions. The government has sought to address these concerns by offering compensation to affected parties and exploring other options to safeguard workers’ pensions.
Overall, Ghana’s efforts to address its debt sustainability challenges and restore macroeconomic stability will require a combination of structural reforms, fiscal consolidation, and external support from multilateral institutions. The government’s willingness to engage with stakeholders and explore beneficial options, while protecting workers’ pensions, will be critical to achieving these goals.
