The Jordanian government spent more than JD270 million on pension payments last year, although governmental deductions for that purpose did not exceed JD23 million, according to a financial expert.
Speaking at the 13th meeting of the Economic Policy Forum on Tuesday, January 2nd, Mohammad Said Nabulsi, chairman of the board and CEO of Jordinvest and chairman of the forum, said that the economic problems facing the government pension fund were usually ignored, and most often addressed from a strictly social point of view.
"The government pension fund is technically bankrupt," Nabulsi said, adding that since all deductions from government employees for the fund went directly to the state treasury, and none were invested.
Meanwhile, noted Nabulsi, the state budget had to cover all the increasing pension allowances.
Nabulsi, who is a former director of the Central Bank of Jordan, added that 4.6 percent of the 7 percent predicted deficit in the state budget for 2001 is the direct outcome of the deficit in revenues from the government pension plan and social security.
He added that this accumulating deficit would reach more than JD4 billion in "invisible debt" within the coming 10 years.
As for the Social Security Corporation (SSC), which is generally the institution that deals with pensions in the private sector, Nabulsi said that it faced a completely different set of long-term difficulties.
"Although the SSC is making large profits from several investments at the time being, there will be no surplus in the corporation by 2023-2024, when revenues and expenditures are expected to break even, and the SSC will spend the last of its assets by the years 2041-2042," Nabulsi said, quoting the notes of the SSC auditor for the corporation's 1998 budget.
Nabulsi added that long- term studies conducted on the SSC performance as an insurance institution showed that the future obligations of the corporation, with the increasing numbers of individuals reaching retirement age, will exceed its assets in less than 40 years.
Citing an International Monetary Fund commission report, Nabulsi said: "Treatment of the dire status of the government pension fund may prove impossible in the short run."
He added that the report indicated that turning the fund into an investment-based system similar to the SSC, or transferring it to the SSC were instrumental for a long-term treatment.
He added that the government should refrain immediately from hiring any more employees under the current pension system, and to transfer them to the SSC, "which the government has already started doing," Nabulsi said.
As for the short-term, Nabulsi proposed rescheduling the pension debts by issuing government 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 the re-evaluation of investment plans of the corporation's assets and their revenues, in an effort to postpone the time when the corporation's expenditures would exceed its investment revenues.
He added that the current SSC legislation did not address the management of the corporation's investments. ¯ (Jordan Times)
By Yacoub Abu Ghosh
© 2001 Mena Report (www.menareport.com)
