Sierra Leone Pension Fund Buying Government Debt as Rates Rise

Freetown, Sierra Leone, Capital Markets in Africa: Sierra Leone’s state-owned pension fund is increasing its holdings of government debt after rates more than doubled this year on Treasury bills sold by the West African iron-ore and cocoa producer.

The National Social Security and Insurance Trust, or Nassit, is also increasing the maturities of its fixed-income investments, Alpha Keita, head of the fund’s Treasury Investment Division, said in an interview in Freetown, the capital. Nassit holds 105 billion leones ($27 million) of government debt, including Treasury bills and two-year bonds, among assets of 1.46 trillion leones, he said.

An Ebola epidemic that ravaged Sierra Leone, killing more than 11,000 people in West Africa, combined with a slump in iron-ore prices to push the country into a recession in 2015. The economy is forecast to expand just 0.1 percent this year, forcing the government to borrow at higher rates to finance its budget shortfall. With the Ebola outbreak contained, Nassit is moving into longer-maturity debt that offers better returns, Keita said.

“During the Ebola period when the interest rate was very volatile, we took a policy as a treasury management unit to stick to the 91-day” bills, Keita said. “Now that the interest rate is improving, especially for the one-year, it makes sense” to buy longer-maturity notes, he said.

Sierra Leone sold 364-day Treasury bills at a rate of 25.26 percent on May 12, compared with 6.26 percent for 91-day securities and 10.73 percent for 182-day notes. The finance ministry has stopped sales of two-year bonds after an auction in January failed to attract sufficient bids, Mathew Dingie, director of the budget bureau, said by phone on Tuesday.

Source: Bloomberg Business News