Govt to allow pension funds to invest offshore

THE Government is working on modalities that will allow pension funds to invest their monies offshore, Finance and Economic Development Minister Mthuli Ncube has said.

The industry has been lobbying the State for permission to invest local pensioners’ contributions out of the country, especially following the re-emergence of significant inflationary pressures during the 2018/2019 currency reforms.

According to an earlier submission by the industry to the authorities, players sought permission to get some assets offshore at a threshold of even 25 percent, a move aimed at value preservation.

In a recent engagement with the industry, Minister Ncube said this will soon be possible following establishment of necessary modalities.

“What I am going to be doing as I fine-tune the rules for investment in the Offshore Financial Centre is to allow pension funds to invest offshore.

“We are fine-tuning that to see to what levels pensions can invest offshore and hold assets in hard currency. To me that will be progress in terms of diversification of risk for pension funds,” he said.

Despite the initial inflationary pressures that came with the re-introduction of the Zimbabwe dollar, the macro-economic environment has stabilised in recent months.

In what was seen as a second round of hyperinflation, the Zimbabwe dollar, which was re-introduced in June 2019, and depreciated from an initial 2,5 to the United States dollar to current official levels of around 85 to the US dollar, with the Public Accountants and Auditors Board Zimbabwe (PAAB) already having classified the economy as hyperinflationary.

But measures such as the Reserve Bank of Zimbabwe (RBZ)’s foreign currency auction system, as well as tight fiscal management has stabilised both depreciation of the local unit and the annual rate of inflation.

As at June 2021, Zimbabwe’s annual inflation stood at 106,64 percent.

Presently, pension funds are able to invest in United States dollar denominated assets in the country, following the promulgation of Statutory Instrument 280 of 2020.

Such investments include, but are not limited to, equity investments on the Victoria Falls Stock Exchange (VFEX) and some private equity investments.

The Finance Minister has also indicated the broadening of investment offerings by Government.

“I’m aware of that, and suspect that (the pensions industry)’s appetite for fixed income assets will improve as inflation comes down to the 10s, then we can offer a yield that is positive in real terms, and that should improve the situation. We are also looking at issuing a fixed income in hard currency,” he said.-herald.cl.zw