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Most of the Fund's investments have been locked in Treasury Bonds which are long[term investments with maturity periods between five to 20 years due to high yields.
Patrick M. Ayota, the NSSF acting managing director, said they are going to adopt the short-term Treasury Bills compelled by the need to stock liquidity for mid-term access.
“We are now investing in the 91-day Treasury Bills despite a decline in yields [interest] for liquidity purposes to manage mid-term access,” he said.
He noted that between June and December last year, over 22,000 people applied for and accessed their mid-term benefits leaving a void that necessitated the need for more liquidity.
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Despite these changes, Ayota said a large chunk of NSSF's investments will remain in Treasury Bonds.
However, short-term government debt is not favourable for investors because of its poor performance in interest for the last few months. The Ministry of Finance reported in the February Performance of the Economy that interest rates on Treasury Bills declined due to reduced demand.
For instance, the interest of 91-day, 182-day, and 364-day tenors fell from 10.55 percent, 11.14 percent, and 12.15 percent respectively in December, to 9.73 percent, 10.13 percent, and 11.02 percent in January.
“This was partly due to reduced demand from the government following the decision to substitute a portion of domestic borrowing with external debt,” said the Ministry of Finance.
As of January, the government has raised a total of Shs2.684 trillion for financing budget items compared to the planned Shs4.965 trillion for the 2022/23 financial year.
NSSF holds at least 78 percent of its investments in fixed income, 15 percent in equities, and seven percent in real estate.
It remains one of the only institutions that are able to mobilise large pools of long-term domestic capital for development funding.