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World Bank: MENA pension systems in dire need of reform

The World Bank said pension systems in the Middle East and North Africa are under growing financial stress and urgently need reform. In a report released today entitled Pensions in the Middle East & North Africa, the World Bank called for a series of measures that would allow governments to gradually reform their unsustainable pension systems, and avoid future crises.

The report said pension systems in the region face problems in terms of limited coverage, fragmented administration, and system designs that negatively affect incentives and equity.

The report suggests that pensions systems try to offer too much in terms of benefits.

On average, full-career workers would receive a pension of nearly 80 percent of earnings before retirement.

This is much higher than the pension promise in 24 high-income countries (as well as 10 countries in Eastern Europe and Central Asia and nine countries in Latin America and the Caribbean), where pension represents on average 57 percent of pre-retirement earnings.

"Pension crises are often associated with an aging population, which is misleading. In the MENA region, where 60 percent of the population is made up of young people, pension systems are already facing financial problems," according to Christiaan Poortman, World Bank vice president for the Middle East and North Africa.

"So, the problem is structural, not demographic. The time for change is now. Postponing pension reforms will require dramatic adjustments in the future and it implies transferring the cost of reform to future generations," he added.

Progress on pension reform has been uneven across the MENA region. Some countries like Algeria, Libya, and Syria are in the very early stages of the reform process or have not yet initiated discussions. In other countries like Iran, Iraq, Tunisia and Yemen, policy discussions are more advanced but a coherent strategy has yet to emerge. Djibouti, Egypt, Jordan, Lebanon, Morocco, and the West Bank and Gaza, on the other hand, have made strides in pension reform, drafting progressive pension laws or introducing structural reforms.

The report urges countries in the early stages of reform, to conduct a proper assessment of the financial problems facing the systems. Without this baseline, it is not possible to initiate discussions about the costs and benefits of alternative reform packages.

Beirut,08 29 2005
The Daily Star
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