Organised labour says it is opposed to new attempts to restructure pension funds worth about $2.7 billion. 

The government has sent new terms in its second round of DDEP programme to Pension fund managers which analysts say is an indication that the threshold of debt to Gross Domestic Product (GDP) is yet to be achieved.

However, labour unions are adamant, saying they still stand by their earlier decision to the government to exempt pension funds from the DDEP.

In a new proposal, the government is seeking to restructure local currency bonds held by pension funds as part of efforts to bring the country’s debt to sustainable levels.  

Under the IMF programme, the government aims to bring the threshold of debt to GDP to 55 per cent as one of the major pillars to access funding from the Bretton woods institution among many other actions.

It has emerged this week through the Graphic Business sources that labour unions have asked for more time to study the new proposal from the government, however, indications are that the labour front is hesitant with the new proposal.

Alternative offer

Speaking to the Graphic Business in an exclusive interview, the Secretary-General of the Trades Union Congress (TUC), Dr Yaw Baah, said the new proposal from the government to the Board of Trustees of Pension Funds to participate in a new alternative offer had not been accepted by the labour front.

While the labour front has urged the Trustees of the Pension Funds not to further engage the government on its new proposal, Dr Baah said there were still deliberations among the various labour unions on the proposal.  

“We have scrutinised this letter and other accompanying documentations and have come to a firm conclusion that the proposal amount to roping in pension funds back into the DDEP”.

Organised labour, he said, would resist any attempt by the government to undermine the agreement reached last year on pension funds.

“This new request undermines the spirit and letter of the MoU signed between the government and organised labour,” Dr Baah told the Graphic Business.

Organised labour served notice last year it would embarked on an indefinite strike if pension funds were included in the DDEP.The government backtracked and exempted pension funds from the DDEP programme.

New deal

In January this year, the government said it had made significant progress with all stakeholders including financial sector industry associations and representative groups of individual bondholders, with respect to their participation in the DDEP.

The progress was based on agreements reached with the Ghana Association of Banks (GAB),the Ghana Insurers Association (GIA) and the Ghana Securities Industry Association (GSIA), which saw the acceptance of new terms of the exchange.

The government then began discussions with organised labour and pension fund trustees on a separate arrangement in accordance with the MoU signed with organised labour on December 22, 2022 and in line with the government’s debt management programme.

When successful, the government would swap short maturity period bonds that have coupons averaging 18.5 per cent for extended maturity dates and yields averaging 21 per cent.

Background

Finance Minister, Ken Ofori-Atta, at the Spring Meeting of the Bretton Woods in Washington last April, called for organised labour to help the government shoulder the burden of economic revitalisation.

When asked by journalists during the press conference in Washington what exactly he wanted organised labour to do to help the government, Ofori-Atta was evasive with his answers.

There were fears then that the exemption granted to pension funds will be thrown out of the window and that pension funds may suffer a haircut following the minister’s coy responses to what was to be expected from labour unions after his plea to them to help the government manage its domestic debts.

The Graphic Business reported in the April 18 edition that pointed to a possible revisit of the exemptions offered pension funds from the DDEP. However, Mr Ofori-Atta was swift to dismiss the reports.

Following labour agitation last year, pension funds were exempt from the DDEP.

Leaked memo

Pension funds, which are largely managed by fund managers on behalf of organised labour, were exempted from the DDEP that saw investors taking on losses. However, a Memorandum of Understanding (MoU) that was signed with the funds managers required them to help the government bring the debt to sustainable levels.

In a leaked letter authored by Mr Ofori-Atta to the trustees of the funds, the Finance Ministry sought to invoke the MoU when he requested the trustees to accept new terms meant to help address the government’s financial needs, while maintaining the value of the pension funds.

“The proposed offer entails exchanging your current holdings of treasury bonds, ESLA bonds and Daakye Bonds for a menu of the currently outstanding new bonds (issued in February 2023 and maturing in 2027 and 2028, respectively,” the letter, which also promised to settled the new bonds in April, said.

At his closing press conference at the Spring Meetings, Mr Ofori-Atta said that proposal to the trustees must be seen in the context of burden sharing.

He noted that there was the need to acknowledge that the country was facing an economic crisis that required all hands on deck to address.

“The challenge for us as a nation is the acknowledgement that we do have an economic crisis and that everybody at some point in time has to put his or her shoulders to the wheel,” was quoted as saying.

IMF team in town

An IMF delegation is currently in town to review implementation progress as part of the conditionalities before the second tranche of funds hits the vaults of the Centra Bank.

A scheduled press conference organised by the Ministry of Finance last week had to be postponed on two occasions as a result of the review meetings between government and IMF officials.

Following a deal with the creditor committee on Ghana, the IMF immediately released an amount of US$600 million as part of the US$3 billion after the government received financial assurances from the Committee which was co-chaired by China and France.

Ghana’s economic programme has three main objectives; restoring macro-economic stability, ensuring debt sustainability and laying the foundations for higher and more inclusive growth.

DDEP

After sustaining a voracious appetite for debt, most of which were pricy for years, the country last year defaulted in servicing its obligations. It then turned to creditors for amnesty which culminated in a DDEP that saw about GH¢87 billion of costly and short-dated bonds swapped for low-cost and long-term ones. 

The government last year issued and settled 12 bonds under its DDEP programme and thus become the new benchmark bonds for the fixed-income market at an interest of nine per cent.