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A controversial leak in Morocco! Will the Government raise the retirement age to 65?

Government report: Morocco's pension fund on track to deplete resources by 2026

Rachid Amadan

The meeting held by Morocco’s Ministry of Economy and Finance with trade unions last week created confusion among Moroccan communities over the plan to reform the pension system since the establishment of the National Committee on the subject several years ago, and whether the Government would raise the retirement age to 65 years.
The talk began when proposals were leaked by a study conducted at the request of the Government of Morocco urging an increase in the retirement age to 65 years in the public and private sectors, from 63 years for the public sector and 60 years for the private sector, as well as an increase in the proportion of contributions to pension funds to cope with a crisis of depleted reserves.
Following a meeting of the Committee on Pension Reform in Rabat last week, which saw the presence of the Government and the most representative unions as well as the General Federation of Morocco’s Trade Unions and Pension Fund Managers, the Minister of Economy and Finance, Nadia Fattah Alawi, announced the initiation of a diagnosis of the status of Morocco’s pension system, with a view to achieving principles and agenda for reform.
Successive Moroccan Governments, in consultation with trade unions and employers’ representatives, have examined options to address financial imbalances in the Kingdom’s pension system, which may threaten its ability to meet its obligations in the coming years, in the absence of any effective and effective measures.
In its March report, Morocco’s Supreme Council of Accounts sounded the alarm and stressed in this context that, despite the significant adjustments to the standards of the Moroccan pension system as set out in the 2016 reform, the system is expected to deplete its full reserves in 2026.
The report stated that projections indicate that the system will face a liquidity risk from 2023, consume its financial reserves over 2026, and that the volume of net unmet liabilities amounting to MD 415 billion by the end of 2019 weighs on the system’s financial situation and makes structural reform necessary.
This, in what is known as the General System for the Granting of Retirement Salaries, has been a technical deficit for several years and is expected to face its first overall deficit on the 2028 horizon. The wage pension system administered by the National Social Security Fund will also face its first technical deficit on the 2029 horizon, despite a favourable demographic leverage.
The Board noted that the total retirement coverage of the active population remains limited, noting that with 4.4 million beneficiaries by the end of 2019, the coverage rate does not exceed 43%, despite the significant progress observed in recent years at the level of the National Social Security Fund.
According to the report, the category of 6.3 million active workers not covered by retirement coverage consists mainly of non-wage workers at about 50% of the total, in addition to a significant proportion of unauthorized wage workers in the National Social Security Fund.
Around the world, old age pensions constitute a major challenge amid increased life expectancy as a result of improved living and health conditions. The shrinking demographic contributor base is exacerbating the problem in many countries. This situation does not apply to Morocco. According to the latest statistics of the United Nations Population Fund (UNFPA), nearly two thirds of the country’s population is aged between 15 and 64, providing an ideal population base that can contribute to pension funds.
However, an analysis of the Carnegie Institute published in 2013 identified three main factors underlying Morocco’s pension fund crisis: low labour force participation among women, high unemployment rates and structural issues related to current pensions.
Morocco has three main pension schemes, one for government officials, one for public officials and one for private sector action. These regulations differ for the payroll quota and pension calculation method, creating a form of inequality among participants.
Based on the magnitude of these imbalances, the Supreme Board of Accounts emphasized the « urgency » of reforming these systems, recommending that the standards of the basic pension systems continue to be audited and harmonized, appropriate and innovative funding solutions developed, governance reforms and system leadership.
Raising the contractual age would seem to be one of the Moroccan Government’s most difficult options. As the Fund’s reserves continue to be drained, the Government may move this direction despite any objections it may raise.
It seems that the Moroccan government is not living its best moments with the accumulation of difficult economic and social issues, while a ministerial reshuffle is about to take place in the coming days.
Friday, the 14th of October 2022.

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