The National Social Security Fund (NSSF) encountered a deficit of Shs794 billion in the period ending June 2023. This deficit arose from the payment of interest to members exceeding the available amounts, as highlighted by the Auditor General, John Muwanga.
Muwanga’s report stated that the deficit led to accumulated members’ funds surpassing the total Fund assets by Shs508 billion. The exact period and reasons for the deficit accumulation were not immediately disclosed.
Efforts to obtain explanations from NSSF officials, including managing directors and public relations managers, yielded no response, although they indicated they would revert.
The Uganda Retirement Benefits Regulatory Authority (URBRA) acknowledged the anomaly and emphasized the need for prompt resolution to prevent market distortions.
Financial analysts, like Allan Lwetaba, suggested that the deficit might have stemmed from NSSF’s inability to meet projected income from its investment vehicles. Reduced income from investments could have affected financial obligations, particularly the requirement to provide a competitive return on member savings.
During the period, NSSF’s income from investments increased by 15 percent, allowing for a 1 percent increase in paid benefits. However, the Fund’s investment income might have been lower than projected due to losses from capital flight, foreign exchange, and constrained cash-flow from cross-border equity investments.
Lwetaba also highlighted the impact of URBRA’s measures, restricting pension funds from tapping into reserves to compensate for deficits. Despite NSSF’s investment portfolio, which provides the potential for correction, the reserves held by the Fund were insufficient to address the Shs794 billion deficit.
