Rabat – Despite reforms, Morocco’s pension fund deficit is expected to increase to MAD 36.4 billion by 2045.
Since 2014, the Moroccan pension fund (CMR) has been facing a deficit, according to a report on social protection by the Economic, Social, and Environmental Council (CECE).
According to the CECE report, the National Social Security Fund (CNSS) will operate on a “technical” deficit starting in 2018 and a total deficit in 2027. Its reserves will be bankrupt in 2044. Reform is needed to ensure long-term financial balance.
The same source stressed that Morocco’s gap in social protection is due to the lack of many factors, namely, common political vision, a formal strategy, an integrated accounting system and a unified system of information regarding social protection. The report also stated other causes including poor coordination between state institutions particularly the government, ministries of finance, employment, social Affairs, family and, solidarity, and the Supreme Council of Accounts.
The two major pension funds for government employees are CMR and the Collective Retirement Benefit Scheme (RCAR). The CNSS covers private sector employees.
The Oxford Business Group (OBG) painted an even bleaker picture than CECE. According to an OBG report, CMR will become bankrupt by 2021. CNSS and RCAR could collapse by 2021 and 2037, respectively.
To prevent CMR’s collapse, the government had begun to raise the retirement age for most government employees from 60 to 62, beginning in July 2015. The retirement age was set to be gradually raised—by six months every year—until it reaches 65 years.
In 2013, Abdelilah Benkirane, then head of government, said, “Our pension systems are at stake. No one wants to reach a situation like in Greece…. Of course we will negotiate with unions, but raising the retirement age is an obligation to avoid a collapse disaster.”
In 2016, the Benkirane Moroccan government reformed the pension system established in 1971 by taking gradual measures. The reform planned to gradually increase the retirement age from 62 to 63 over three years, starting January 1, 2017. It also aims to gradually increase the pension contributions (now 12 percent) of both employees’ salaries and employers to 14 percent in January 2019.
Despite their economic and social importance to the state and citizens, Moroccan pension systems and compulsory social security systems currently cover just over 40 percent of the total working population, according to CECE.
Contributors to pension system are mainly civil servants, employees of state-owned companies, and private sector employees.
Those not covered include freelancers, entrepreneurs, and workers in the informal sector—particularly in agriculture, handicrafts, and small cooperatives. Individuals who do not work because of accidents or being fired are also not covered, as well as unworking divorced spouses whose former spouses may be covered.
According to CECE’s 2018 report, the rise in the number of pensioners and the decline in the number of contributors to the pension will make today’s young people bear the financial burden. The government will be forced to raise the retirement age, increase required pension contributions, or reduce pensions.
Although the system’s reserves can make up the deficit until 2027, the CECE claimed that the 2016 reform will not resolve the deficit, which necessitates the government find ways to fund the system in the near future.
Speaking to King Mohammed VI on Sunday, Abdellatif Jouahri, the governor of Bank Al-Maghrib (BAM), Morocco’s central bank, said the measures the government implemented to reform the pension system in 2016 were “only a first step providing a temporary treatment.”
“The number of pensioners gradually accelerates the depletion of the CNSS’s resources and thus stresses the urgent need to embark on the next steps to complete comprehensive reform in a way that ensures the sustainability of the pension system.”
CECE made several specific recommendations for pension reforms. It recommended the unification of the three pension funds within a period of 5 to 7 years. It also recommended that elderly people who do not benefit from a pension should be given a minimum income equal to the poverty threshold. CECE also called for the establishment of a “compulsory basic public pension system” to include all workers from both public and private sectors.
