Pensions industry foreign currency assets in 42pc jump

TOTAL foreign currency assets for the pensions industry jumped 42 percent to US$326 million during the nine months to September 30, 2023, compared to US$228 million recorded in the same period in the prior year.

This comes as businesses and transactions are largely skewed towards US dollars as opposed to local currency.

The Reserve Bank of Zimbabwe has estimated that US dollar transactions account for over three-quarters of total transactions in the country, as businesses and individuals seek to hedge against inflation and currency volatility.

However, during the period under review, the economy continued to recover from various macro-economic challenges, resulting in improved performance during the third quarter of 2023.

The Government implemented bold policy interventions to address transitory price and exchange rate volatility, and as a result, the financial sector has begun to experience stability.

Weighted annual inflation during the period under review was on a downward trend to close at the annual rate of 100.95 percent in September 2023, while monthon-month closed at 1 percent.

According to an Insurance and Pensions Commission (IPEC) third quarter 2023 pensions report, the major asset clusters were equities, prescribed assets, and money market investments, which constituted 47 percent, 20 percent, and 9 percent, respectively.

This was compared to the major asset classes at the same time last year, which were equities, prescribed assets, and money market investments, constituting 29 percent, 22 percent, and 15 percent, respectively.

The comparison shows that equity investments increased by 18 percent while money market investments decreased by 6 percent.

“The holding of foreign currency-denominated assets helps in cushioning the assets from being eroded by inflation in the current hyperinflationary environment.

“Contribution arrears as of September 30, 2023, stood at US$14,66 million, thus constituting 4 percent of the industry’s foreign currency-denominated assets,”said IPEC in a report for the period.

In terms of income, total forex income as of September 30, 2023, amounted to US$79 million, compared to US$54 million recorded during the same period in the prior year, representing a 46 percent increase.

According to IPEC, the realised income amounted to $US65 million. During the review period, total benefits expenditure amounted to US$9,91 million, while total administrative expenditure amounted to US$22,49 million, with the total expenditure for the period pegged at US$32,40 million.

“This shows that 69 percent of the total foreign currency income is going towards administration expenses as compared to benefits,” said IPEC in the report.

Total contributions as of September 30, 2023, amounted to US$34 million.