Staff Writer
The Government Institutions Pension Fund (GIPF) says it’s in a position to pay all pension benefits due to its members in the public service in the event government considers retrenchment as a means to save on its ballooning wage bill.
This comes as Finance Minister Iipumbu Shiimi in his maiden budget statement on Wednesday raised concern about the unsustainable government wage bill in light of declining revenues.
“In the event that government decides to retrench members of the public service we are in a position to honour any accumulated liabilities due to members. The Fund has adequate assets and risk reserves totaling some N$25.9 billion which have been put aside to ensure that the liabilities are not understated, and that the Fund can pay the promised benefits as they fall due. These reserves will provide the necessary cushion in instances as the ones you are alluding to,” GIPF’s Chief Executive Officer/Principal Officer, David Nuyoma said.
He said the fund was not concerned about the possible default by government on its bonds considering its increasing debt position, with its debt stock estimated to rise to N$117.5 billion in FY2020/21, amounting to 68.7 percent of GDP from 54.8 percent in FY2019/20.
“The answer is no. We carefully consider all risks associated with investing everywhere, including when investing in government bonds. We only invest when we conclude that we are appropriately rewarded for all risks taken. We remain invested in bonds within the parameters of the Asset and Liability of the Fund,” Nuyoma said.
Quizzed on the losses that the fund has incurred through its investments locally and on international markets following the emergence of Covid19, he said “We know that Covid-19 is negatively impacting markets locally, regionally and internationally. The GIPF is a long-term investor, and while markets may fluctuate on a daily basis, our liabilities are long-term in nature, hence our investments should not be unduly influenced by sharp adjustments in value of assets we are invested in.”
“As a long-term investor, GIPF will remain alert, but will not make any rushed investment decisions in light of this pandemic. In order to control the effect of market fluctuations such as currency movements during these volatile times, the Board has proactively taken protective measures such as currency hedges. We continue monitoring the markets and will take any other necessary mitigating actions as and when it becomes necessary. The diversified nature of our investments and income streams in terms of asset allocation is another risk mitigating measure the Fund has in place. Above all, the Fund has a liability-driven strategy that is comprised of a robust Asset Liability Modeling (ALM) process.”
On what measures the Fund implementing to mitigate further investment loses, Nuyoma said, “
We continue to be anchored in our investment philosophy of investing in a way that we would be immunised from the effects of changes in our liability (benefits due to members). As indicated above, in order to control the effect of market fluctuations such as currency movements during these volatile times, the Board has proactively taken protective measures such as currency hedges.”
He, however, ruled out any possible jobs cuts or salary cuts as part of cost cutting measure inlight of the negative impact of the pandemic on business, including the fund’s investments.
“The fund operates on an annual budget that is not dependent on market movements. As a consequence, there has been little impact in as far as our structure or remuneration scales are concerned,” Nuyoma said.
