Economist
Member
- Dec 25, 2008
- 27
- 4
Govt should enhance oversight over pension funds IMF
2008-12-27 11:03:04
By Guardian Reporters
The International Monetary Fund (IMF) has advised the government to ensure it builds up oversight over the rapidly-growing pension funds with view to making them contribute significantly to the national economic development.
The guidance comes at a time when the country boasts of six mandatory pension schemes, yet covering only 16 million people, or 5.4 per cent of the labour force.
Tanzanian pensions sector is increasingly facing pressure liberalise, for as late as December last year, records show that about 622 billion of employees` money collected by three major pension funds in Tanzania were lying idle.
The IMF Board issued the directive early this week during its fourth review of the three-year Policy Support Instrument (PSI) for Tanzania which is aimed at helping the country to sustain broad-based high growth and accelerate progress in poverty reduction.
Board`s comments about pension funds because PSI partly aims at bolstering financial sector reforms and the effectiveness of monetary policy, while improving the business climate to stimulate private sector-led growth.
Most pension funds in Tanzania have over-concentrated their investment portfolios either in real estate, Treasury Bills or in some medium scale joint ventures.
Under a financial sector adjustment credit from the World Bank, Tanzania plans to reform its financial institutions, including the pensions sector.
One of the cases for diversifying pension funds` investments advocate for legal reforms that would introduce new arrangements that would allow members to use their savings as collateral for accessing loans.
Leading pension funds - the National Social Security Fund (NSSF) and the Parastatal Pension Fund (PPF) - have often been disapproved of their engagement in risk concentration, most so by putting too much of the workers` money in commercial buildings.
Still on records, some pension funds have been maligned for lending billions of shillings to well-connected businessmen, while even others condemned for having advanced unsecured loans to political parties and senior politicians.
Besides NSSF and PPF, Tanzania has other four major pension funds -the Public Service Pension Fund (PSPF), Government Employees Pension Fund (GEPF), Local Authorities Provident Fund (LAPF) and the Zanzibar Social Security Fund (ZSSF).
In sharp contrast with Kenya, which has a Retirement Benefits Authority, Tanzania has no regulatory system for pension funds.
At the operational level, systems are even more complicated as every one of the pension funds report to diverse ministries.
For instance, PSPF, PPF, GEPF, and ZSSF are answerable to the Ministry of Finance, LAPF reports to the Ministry of Local Government and NSSF is accountable to Ministry of Labour.
Decision-making on issues such as investments projects go through several levels, bureaucratic as it can be, including the parent ministry, the board of trustees of each fund, the CEO, and employees.
Likewise, IMF has urged Tanzanian authorities to continue to implement sound macroeconomic policies by targeting strong fundamentals, including low public debt and ample international reserves.
In particular, abundant foreign exchange reserves would help Tanzania cope with the current global economic downturn and volatile commodity prices.
``Nevertheless, downside risks remain, and the authorities must remain vigilant, developing contingency plans``, statement reads in part.
Unlike pension funds, the IMF`s Deputy Managing Director and Acting Chair Murilo Portugal said Tanzania banking sector has so far fared well, though prudential regulation and supervision need to be strengthened, especially in the context of plans to gradually liberalise the capital account of the balance of payments.
While higher infrastructure investment to support growth has been suggested, yet IMF urges for care to be taken to achieve value for money and avoid a re-accumulation of unsustainable public debt.
SOURCE: Guardian
2008-12-27 11:03:04
By Guardian Reporters
The International Monetary Fund (IMF) has advised the government to ensure it builds up oversight over the rapidly-growing pension funds with view to making them contribute significantly to the national economic development.
The guidance comes at a time when the country boasts of six mandatory pension schemes, yet covering only 16 million people, or 5.4 per cent of the labour force.
Tanzanian pensions sector is increasingly facing pressure liberalise, for as late as December last year, records show that about 622 billion of employees` money collected by three major pension funds in Tanzania were lying idle.
The IMF Board issued the directive early this week during its fourth review of the three-year Policy Support Instrument (PSI) for Tanzania which is aimed at helping the country to sustain broad-based high growth and accelerate progress in poverty reduction.
Board`s comments about pension funds because PSI partly aims at bolstering financial sector reforms and the effectiveness of monetary policy, while improving the business climate to stimulate private sector-led growth.
Most pension funds in Tanzania have over-concentrated their investment portfolios either in real estate, Treasury Bills or in some medium scale joint ventures.
Under a financial sector adjustment credit from the World Bank, Tanzania plans to reform its financial institutions, including the pensions sector.
One of the cases for diversifying pension funds` investments advocate for legal reforms that would introduce new arrangements that would allow members to use their savings as collateral for accessing loans.
Leading pension funds - the National Social Security Fund (NSSF) and the Parastatal Pension Fund (PPF) - have often been disapproved of their engagement in risk concentration, most so by putting too much of the workers` money in commercial buildings.
Still on records, some pension funds have been maligned for lending billions of shillings to well-connected businessmen, while even others condemned for having advanced unsecured loans to political parties and senior politicians.
Besides NSSF and PPF, Tanzania has other four major pension funds -the Public Service Pension Fund (PSPF), Government Employees Pension Fund (GEPF), Local Authorities Provident Fund (LAPF) and the Zanzibar Social Security Fund (ZSSF).
In sharp contrast with Kenya, which has a Retirement Benefits Authority, Tanzania has no regulatory system for pension funds.
At the operational level, systems are even more complicated as every one of the pension funds report to diverse ministries.
For instance, PSPF, PPF, GEPF, and ZSSF are answerable to the Ministry of Finance, LAPF reports to the Ministry of Local Government and NSSF is accountable to Ministry of Labour.
Decision-making on issues such as investments projects go through several levels, bureaucratic as it can be, including the parent ministry, the board of trustees of each fund, the CEO, and employees.
Likewise, IMF has urged Tanzanian authorities to continue to implement sound macroeconomic policies by targeting strong fundamentals, including low public debt and ample international reserves.
In particular, abundant foreign exchange reserves would help Tanzania cope with the current global economic downturn and volatile commodity prices.
``Nevertheless, downside risks remain, and the authorities must remain vigilant, developing contingency plans``, statement reads in part.
Unlike pension funds, the IMF`s Deputy Managing Director and Acting Chair Murilo Portugal said Tanzania banking sector has so far fared well, though prudential regulation and supervision need to be strengthened, especially in the context of plans to gradually liberalise the capital account of the balance of payments.
While higher infrastructure investment to support growth has been suggested, yet IMF urges for care to be taken to achieve value for money and avoid a re-accumulation of unsustainable public debt.
SOURCE: Guardian
