Large groups of the population in Arab countries remain outside pension programmes. They include mainly women, the self-employed and those working in agriculture and the informal sector. On average, the pension coverage rate for the region does not exceed 35% of the workforce, noted Ms Najat El Mekkaoui, a senior economist and professor at Paris Dauphine University.
Furthermore, most pension systems in the region are unsustainable, accumulating very high pension liabilities due to high replacement rates (for civil servants) and very low contribution rates. Since their introduction, there have been no major changes and pension reforms in these countries, Prof Mekkaoui said in an article by the Giza-based Economic Research Forum, a regional network dedicated to promoting high-quality economic research on sustainable development in the Arab countries, Iran and Turkey.
Pension income coverage varies drastically among Arab countries, ranging from a low of 8% in Sudan to a high of 72% in Algeria.
On the high end of the spectrum, over 50% of the elderly population in Tunisia, Iraq, Saudi Arabia and Egypt benefits from pension coverage, while in high-income Gulf countries, pension income coverage is 47% in Bahrain, 35% in Qatar, 29% in Kuwait and 47% in Oman.
At the bottom of the class, the situation is the least favourable in Palestine and Sudan with around 10% pension income coverage.
In Palestine, coverage is exclusively for workers in the public sector and non-governmental organisations. Formal old age assistance programmes are available primarily through the Ministry of Social Affairs and aid programmes funded by the EU, the UN and the World Bank. But these programmes are limited in scope and dependent entirely on foreign donors. Therefore, they cannot guarantee beneficiaries either a regular income or sustainable payments.
In some countries, there is no protection at all for the elderly.
Until recently, the elderly in most Arab countries have benefited from intergenerational solidarity. But demographic trends and social changes are likely to negatively impact the traditional system where family and children play a central role in providing assistance to the elderly.
In the Arab countries, the total population aged 60 and above was 16.5 million in 2000. It is now 28 million and continuing to grow at an accelerating pace.
In nine countries in the region – Algeria, Bahrain, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar and Tunisia – there will be more people over 60 than children under 15 by 2050.
“We can expect that with ageing, low social security benefits and inadequate family support, a significant number of older people, especially women, will end up living in very bad conditions during their retirement. They are also likely to face chronic diseases, dementia and mental illness without any healthcare support,” Prof Mekkaoui said.
A report last year by the Arab Monetary Fund and World Bank highlighted the urgent need to reform the pension system in the region. The main challenges facing the region are: improving the efficiency of pension systems – reducing costs, improving investment strategies and governance, improving the sustainability, equity and affordability of pension programmes and expanding coverage of pensions. M