Nowhere to invest US$5.7B Dominican Republic Pension Fund
Santo Domingo.- Even with the pension funds’ encouraging figures – 97% of the affiliated working population has RD$232.0 billion (US$5.7 billion) accumulated -, the lack of financial instruments to reinvest that money poses a threat against obtaining higher earnings.
Pension Fund superintendent Joaquin Geronimo made the warning Wednesday, noting that if the banking sector fails to create those financial instruments, then the state, “which is also in need of funds,” can use the funds on infrastructure.
“Pension funds are waiting for instruments to emerge basically mortgage bonds, trusts, debt in the securities market, and titles which produce investment funds.”
“While banks have excess liquidity for the same pension funds, as they have deposited RD$70.0 billion in short-term certificates, with rates of 3%, 5% and 6%, they use them to do business at higher rates, but not invest them in other instruments,” the official said.
Geronimo said the pension funds have a monthly liquidity of RD$5.0 billion and short-term bank deposits at very low interest. “In this backdrop RD$25.0 billion could enter the pension funds by December and short-term maturity certificates of between RD$50.0 billion and RD$60.0 billion are in the banks.”
He said that leaves only bank certificates as the destination for the funds, at 3.8%, “which means that pension funds are facing a big challenge in the absence of financial instruments to invest,” and that’s why the Pension Superintendence (Sipen) expanded the Government’s spending limits, which is, Geronimo says, the only qualified issuer able to access those funds to invest in productive sectors.
Interviewed by the Corripio Communications Group, Geronimo said given the private banks’ “inertia,” the State-owned Reservas bank should spearhead the creation of financial instruments as an investment destination for the funds, adding that by year end, the pension funds will reach an estimated RD$260.0 billion.
Category: DR News |