In a departure from its previous practice of only using pension funds to finance the government’s budget deficit through the sale of treasury bills, Ethiopia’s Public Servants Pension Fund Administration has capitalized on the financial sector and other profitable undertakings.
According to The Reporter, this new policy assisted the Fund in generating 3.2 billion birr in revenue until the end of the third quarter of the recently concluded fiscal year, exceeding 130 % of its target for the period. The Fund purchased shares from five commercial banks, including the Development Bank of Ethiopia (DBE), Bunna, and Berhan Banks, with each investment yielding a 20% dividend on 1,000-birr worth of shares. This is a far cry from the returns on T-bills and T-bonds, which were 9% and 5% per annum, respectively.
A large portion of the collected pension is still being largely invested in T-bills, which are deriving more money since the liberalization of the treasury market has taken place. From the Br26.4 billion collected by the administration during the reporting period, over 18 billion birr in pension went towards T-bills. However, Assefa Manaye, the Fund’s plan, research, and reform director, told the Reporter that this investment is bringing a return much lower than the inflation rate.
The proposed solution is to invest in more profitable ventures, but insiders told the Reporter that the board, which is led by key government officials, may not allow other investments over T-bills. Finally, Assefa stated that buying bank shares is an accessible option but once the stock market is operational, a lot more options will be available.
