lmplicit Pension Debt in the Middle-East and North Africa: Magnitude and Fiscal lmplications

Robalino, David and Bogomolova, Tatyana (2006): lmplicit Pension Debt in the Middle-East and North Africa: Magnitude and Fiscal lmplications. Published in: Middle East and North Africa Working Papers Series No. 46 (June 2006)

Abstract

This paper breaks down the contingent liability of a mandatory pension system into two components: the implicit pension debt and the pay-as-you-go asset. It then estimates these two components for 12 pension schemes across six MENA countries and presents international comparisons. The results show that implicit pension debts are large (in the order of 50% to 100% of GDP), often higher than the explicit public debt. At the same time, the large majority of pension schemes have negative pay-as-you-go assets. Under these circumstances, it is misleading to consider the implicit pension debt a contingency, as the government will have to finance it with almost certainty. In the absence of a default the fiscal impacts are expected to be large. The paper recommends including in the assessment of public debt sustainability the implicit liabilities of the mandatory pension system and the pay-as-you-go asset.

• Item Type: MPRA Paper
• Language: English
• Keywords: Pensions, implicit pension debt, fiscal policy, government bonds, contingent government liabilities
• Subjects: E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E62 - Fiscal Policy; H - Public Economics > H5 - National Government Expenditures and Related Policies > H55 - Social Security and Public Pensions; G - Financial Economics > G2 - Financial Institutions and Services > G23 - Non-bank Financial Institutions ; Financial Instruments ; Institutional Investors

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