The ban on overseas investments by Ghana's pension funds highlights the government's cautious approach to managing the economy during a period of currency instability.
The situation reflects a broader trend in emerging markets where governments are increasingly protective of domestic liquidity amid global economic uncertainties.
The conflicting views between pension fund managers and regulatory authorities suggest a need for clearer guidelines and communication regarding investment policies.
If the currency continues to decline, the government may face increasing pressure to revise its stance on overseas investments to attract more capital.
Potential reforms in the regulatory framework governing pension fund investments could emerge as discussions between the NPRA and the finance ministry progress.
The ongoing economic challenges may lead to further restrictions or adjustments in investment policies to safeguard the local economy.
Ghana has implemented a ban on private pension funds from investing abroad amid concerns over the declining value of its currency, the cedi. This decision comes as the country faces a significant depreciation of its currency, which has fallen 25% against the dollar in 2024, following a 17% decline in 2023. The government is worried that overseas investments could exacerbate the currency's decline and impact domestic liquidity.
The National Pensions Regulatory Authority (NPRA) has previously allowed private fund managers to invest up to 5% of their total assets abroad, approximately 2.8 billion cedis ($175.75 million). However, recent actions have halted these investments, leading to confusion among fund managers regarding the legal framework governing such decisions. Some fund managers reported being threatened with sanctions for attempting to invest overseas, despite the NPRA's head stating there was no outright objection to foreign investments, pending government approval.
Ghana's pension fund sector has grown significantly since reforms in 2010, with assets under management reaching 78.2 billion cedis ($4.93 billion) as of June 2024. The majority of these funds are invested in local assets, including government bonds. The finance ministry is currently evaluating the balance between allowing overseas investments and protecting the domestic economy.
