Ghana’s banking sector is urging pension funds and institutional investors to diversify portfolios beyond government securities, following significant losses incurred during the 2023 Domestic Debt Exchange Programme (DDEP).
John Awuah, President of the Ghana Association of Bankers (GAB), emphasized the need for strategic reforms at the 2025 Money Summit, citing the DDEP’s erosion of confidence in government bonds, which traditionally dominated pension and banking investments.
The DDEP, a debt restructuring initiative aimed at stabilizing Ghana’s economy, imposed haircuts on domestic bonds, sharply reducing the value of holdings by pension funds and banks. Awuah noted the programme’s lasting impact on investor trust, particularly for long-term savings vehicles. “Pension funds experienced significant valuation reductions, undermining retirement security for thousands,” he stated, highlighting banks’ parallel losses as major bondholders.
Awuah called for a national shift toward diversified investment strategies to safeguard pensions amid Ghana’s aging population and volatile economic climate. He proposed allocating funds to private equities, real estate, corporate bonds, commercial papers, and green energy projects. “Diversification isn’t just prudent it’s essential to build resilience and unlock growth,” he said, stressing alignment with regulatory guidelines from the National Pensions Regulatory Authority (NPRA).
Commercial papers, recently introduced in Ghana, were touted as a short-term alternative to government debt, offering fixed returns without sovereign risk. Awuah also endorsed green investments, including renewable energy projects and bonds, as dual drivers of economic growth and sustainability. “These avenues marry profit with purpose, supporting Ghana’s clean energy transition,” he added.
While advocating bold portfolio shifts, Awuah cautioned against exceeding NPRA-mandated asset allocation limits, urging adherence to risk management frameworks. His appeal reflects broader lessons from the DDEP, which exposed systemic vulnerabilities in over-reliance on government debt. Pension funds, which allocate up to 80% of assets to sovereign bonds under current rules, now face pressure to rebalance toward higher-yielding, private-sector opportunities.
Ghana’s push mirrors global trends where pension systems in emerging markets increasingly diversify to hedge against fiscal instability. For a nation still navigating post-debt restructuring challenges, the move could enhance capital market depth while insulating retirees from future shocks. Yet, hurdles remain, including limited private-sector investment vehicles and regulatory adjustments to accommodate broader asset classes.
As stakeholders weigh these reforms, the focus turns to balancing innovation with prudence a critical task for ensuring retirement security in an uncertain economic landscape.
