MVR 2.4bn bond investment to build foreign exchange reserves, Pension Office says

The Pension Office has said that investing in an MVR 2.4 billion bond issued by the Ministry of Finance would create a foreign exchange reserve within the pension fund without purchasing foreign currency from the market.

In a statement issued Tuesday, the office said the Ministry of Finance has proposed an investment of MVR 2.4 billion in a dual currency denominated Treasury bond. The proposed investment would be funded through proceeds from the sale of MVR 2.4 billion worth of Treasury bonds currently held by the retirement pension scheme in the secondary market, based on the liquidity position of the pension fund.

Pension Board Chairman Ahmed Inaz has resigned after opposing the transaction.

Board member Ahmed Sarwash resigned in October, while Chief Financial Officer Hawwa Fajwa resigned in November. Both cited concerns that the transaction was being carried out in violation of the Finance Act and internal rules of the Pension Office.

In its press release, the Pension Office said the board’s decision to proceed with the transaction took into account several factors. These included selling bonds in the secondary market to finance the purchase of dual currency bonds without causing losses to the pension fund, aligning investments with advice from consultants involved in developing the long-term investment strategy of the retirement pension scheme, and investing proceeds in a dollar-denominated bond to support the sustainability of the fund. The decision also aimed to extend the maturity of invested assets and increase portfolio returns.

The Pension Office said the transaction would allow the pension fund to create a foreign exchange reserve through investment without acquiring foreign currency from the market. It would also enable the conversion of some Treasury bills currently held by the fund into long-term Treasury bonds, which is expected to increase portfolio returns.