UTAG opposes Government’s proposal to include Pension Funds in debt restructuring

The University Teachers Association of Ghana (UTAG) has voiced its opposition to the government’s proposed alternative offer of including pension funds in the ongoing debt restructuring.

The government has stated that this decision is intended to ease the cash constraints on the government in the coming years while fully compensating pension funds for the value of their current holdings.

However, UTAG has expressed concern that adding pension funds to the debt restructuring program will further burden its already financially struggling members. In a memo released by UTAG, they stated their firm opposition to any such move.

“We are unable to support any intervention that would further worsen the already difficult financial situation of Ghanaian university lecturers. Therefore, we unequivocally reject the request to use our pension funds, including GUSS, SSNIT, and any other pension fund that affects our members, for the newly proposed alternative offer by the government.”

“his request by the government comes after organized labour fiercely rejected the inclusion of pension funds in the Domestic Debt Exchange programme.

UTAG added, “We warn that governmental intransigence in this matter would not be countenanced as we are willing to fight to ensure that no one robs our members of their pensions funds”,.

This is what the Finance Minister has been saying

The Minister of Finance, Ken Ofori-Atta, has presented a proposal that aims to facilitate the execution of the Memorandum of Understanding (MoU) between the government and pension funds, while also addressing the financial needs of the government and maintaining the value of the pension funds.

The proposed offer involves exchanging the current holdings of Treasury Bonds, ESLA Bonds, and Daakye Bonds for a menu of the currently outstanding New Bonds, which were issued in February 2023 and are set to mature in 2027 and 2028.

The New Bond 2027 and New Bond 2028 have an average coupon of 8.4% with a ratio of 1.15x, resulting in an increase in patrimonial value. In addition, the proposal includes an extra cash payment of 10% (strip coupon). According to Ofori-Atta, the stream of coupons to be received as part of this proposal will be 21%, compared to the current 18.5% of the outstanding old bonds.

He further indicated that “in 2023 and 2024, both instruments will pay 5% coupon in cash and the remainder will be capitalized into the nominal amount of the two bonds in order to comply with the cash constraints and the macro-framework defined under the programme with International Monetary Fund (IMF).”

According to the Minister of Finance, the alternative offer has been designed to achieve three main objectives. Firstly, it aims to achieve the same average maturity as the pension funds’ current holdings of the old bonds, which is currently between 4 and 5 years. Secondly, it aims to achieve a similar average coupon, which is currently at 18.5%. Finally, the proposal aims to alleviate the cash constraints on the government over the first two years.

The Finance Minister thus urged the Board of Trustees of pension funds to consider the proposal, indicating that “government is targeting to settle the offer by end of April 2023.”

SOURCE: Coverghana.com.gh