The government spent more than JD270 million on pension allowances last year, although total deposits did not exceed JD23 million, according to a financial expert.
Speaking at the 13th meeting of the Economic Policy Forum last week, Mohammad Said Nabulsi, chairman of the board, CEO of Jordinvest and chairman of the forum, said that the economical problems facing the government pension fund have been largely ignored and often addressed from a strictly social point of view.
“The government pension fund is technically bankrupt,” said Nabulsi, adding that since all deductions from government employees for the fund went directly to the state treasury, and none were invested, the fund was virtually non-existent. Meanwhile, noted Nabulsi, the state budget has to cover the ever-increasing pension allowances.
Nabulsi, former director of the Central Bank of Jordan, added that 4.6 percent of the 7 percent predicted deficit in the state budget for this year is the direct result of the deficit in revenues from the government pension fund and social security.
He added that this accumulating deficit would reach more than JD4 billion in “invisible debt” within the next ten years.
As for the Social Security Corporation (SSC), which is generally the outfit that deals with pension in the private sector, Nabulsi said that it faces a completely different set of long-term difficulties.
Nabulsi added that long-term studies conducted on the SSC analyzing its performance as an insurance outfit showed that the future obligations of the corporation, with the increasing numbers of individuals reaching the age of retirement, will exceed its assets in less than 40 years.
“Although the SSC is making large profits from several investments for the time being, there will be no surplus at the corporation by 2023-2024, when revenues and expenditures are expected to break-even, and the SSC will spend the last of its assets in 2041-2042,” Nabulsi said, quoting a report by the SSC auditor on the corporation's 1998 budget.
According to the International Monetary Fund commission report, “the dire status of the government pension fund may prove impossible to treat in the short run.”
Nabulsi said the IMF report indicated turning the fund into an investment-based system similar to the SSC, or transferring it to the SSC was critical for finding a long-term solution.
He added that the government should immediately refrain from hiring any more employees under the current pension system, and to transfer them to SSC, “which the government has already started doing,” Nabulsi said.
As for the short run, Nabulsi proposed rescheduling the pension debts by issuing governmental bonds with maturity periods of no less than 10-15 years, and using the revenues to finance part of the pension expenditure within the limits of JD100-150 million a year.
In addition, the remaining revenues could be used to decrease the budget deficit, which would help in evading additional taxes and reducing government spending.
As for the SSC, Nabulsi proposed that financial reforms for the corporation should concentrate on evaluating investment plans of the corporation's assets and its revenues, in an effort to offset the corporation's expenditures exceeding its investment revenues.
He added that the current SSC legislation does not address ways of managing the corporation's investments and needs to be revised. — (Jordan Times)
By Yacoub Abu Ghosh
© 2000 Mena Report (www.menareport.com)