The economic expert Idris Al-Sharif has written a proposal to address the Social Security Fund’s inability to implement the pension increases stipulated under Law No. 5 of 2013.The Social Security Fund is unable to implement the increases mandated by Law No. 5 of 2013 regarding raising retirees’ pensions, due to the absence of a sustainable funding source when the current social security contribution rates were set. These rates were determined before the legislation raising pensions was issued; therefore, they do not cover the new obligations.
Second: Important Financial Background
Previously, the following amounts were deducted from employees:Jihad Tax: 3%National Investment Contribution: 1.5%Total: 4.5%These deductions were later halted, which increased employees’ net income without raising social security contributions.
Third: The Proposed Solution
Increase the employee’s social security contribution by 5%.1. The actual impact on the employee’s income would be only half a percent, since the previous deductions (Jihad Tax + National Investment Contribution), totaling 4.5%, are no longer applied.2. Increase the employer’s social security contribution by an additional 5%.Thus, the total increase becomes:5% from the employee5% from the employerTotal: 10% increase in contributionsThis would bring total contribution rates to 30%, which falls within internationally acceptable levels for social insurance systems and allows coverage of the new obligations.
Fourth: Expected Outcomes
Sustainable funding for the Fund
This increase would provide the Fund with approximately:6.5 billion dinars annually(with the wage bill at 65 billion annually)This is the same amount the Fund is currently requesting, but approval has faced challenges within the general budget. Automatic increase as the wage bill rises
Because contributions are collected as a percentage of salaries.Minimal impact on employees’ net income.
The actual increase is no more than 0.5% compared to what was previously deducted.
Fifth: Supporting Measures
Pending the completion of a comprehensive actuarial study for the Fund, this solution can be adopted as an interim measure to ensure:Implementation of the legally mandated pension increases.
Preventing further accumulation of debt on the Fund.
Reducing pressure on the general budget.
Correcting the structural imbalance in the financing system.
In my view, there is no other available (and sustainable) solution for implementing the increase except this one!
