Ghana exempted pension funds from a debt-restructuring exercise, bowing to pressure from unions which had threatened to strike in a bid to preserve their members’ savings.
(Bloomberg) — Ghana exempted pension funds from a debt-restructuring exercise, bowing to pressure from unions which had threatened to strike in a bid to preserve their members’ savings.
Authorities and the country’s biggest labor group, Trades Union Congress, announced the decision late Thursday following meetings aimed at reaching an agreement, they said in a joint statement.
The indefinite strike was meant to start from Dec. 27.
Organized labor will work with authorities “to explore mutually beneficial options with debt sustainability limits,” the two sides said in the statement.
Ghana is restructuring most of its public debt, estimated at 467 billion cedis ($49 billion) as at the end of September in order to qualify for a $3 billion International Monetary Fund program.
Local bondholders have been asked to voluntarily exchange 137.3 billion cedis of debt for new bonds that will pay zero interest in 2023, 5% in 2024 and 10% from 2025 onward.
Out of about 28 pension trustees, only six may have survived the losses, putting contributors at risk, Thomas Esso, executive secretary of the Chamber of Corporate Trustees, said in an interview a the head of the exemption announcement.
“If you’re not receiving coupon payments to be shoring up your capital, for the whole of the year, if you don’t have a strong income surplus, you’d collapse,” said Esso.
“The regulation is that capital shouldn’t be less than 500,000 cedis at any given time, which could be decimated by the restructuring.”
The pension funds held 5.5% of domestic government bonds as at the end of August, according to the Central Securities Depository Ghana Ltd.
Pushback from local investors compelled the government to extend its debt-exchange deadline to Dec.
30 from Dec. 19, as several groups pursue negotiations with authorities.
Read more: Ghanaian Banks’ Capital to Weaken on Debt Restructuring: Fitch
(Recasts with exemption of pension from first paragraph.)
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