Join on WhatsApp 
Join on Telegram Rabat – As Morocco’s government attempts to polish its image as the hailer of a new era of social reforms, recent news of a possible increase in the pension age threatens to revert that image and tank its already low approval rates.
During a meeting last week with labor unions, Morocco’s Economy and Finance Minister Nadia Fatah Alaoui said that the latest round of social dialogue aims to introduce reforms to Morocco’s national pension fund.
While the presence of labor unions from the private and public sectors suggests that the meeting is centered around facilitating access to pension services, observers note that the meeting was mostly an exposition of the current sub-optimal state of the national pension fund.
Echoing earlier reports from the Higher Accountability Council, Morocco’s corruption watchdog, the finance minister pointed out that the pension fund’s reserve will be drained by 2027 at the current rate, stressing the need for introducing reforms.
A timeline of the pension fund crisis
Major state research institutions have been sounding the alarm about the state of the pension fund as early as 2004.
A study from the country’s economic intelligence center, the High Commission for Planning (HCP), shows that the gap between the pensions the state dispatches and the contributions paid would result in a deficit of 7.4% of Gross Domestic Product (GDP), against 1% of GDP in 2005.
It’s worth mentioning that the North African country is not an isolated case.
In developed countries around the world, providing pensions for senior citizens is posing a significant challenge amid increasing life expectancies as a result of improving living and health conditions. The shrinking base of the younger demographic contributing to the fund has exacerbated the issue, which is not the case in Morocco.
The country boasts a young demographic, with a median age of 29.5 years and an adequate fertility rate of 2.4 births per woman, above the population replacement rate of 2.1 births, according to some estimates.
The replacement rate denotes the average number of births per woman necessary to maintain a positive population growth rate in a given country.
As of 2020, close to a third of Morocco’s population was aged between 15 and 65, offering an ideal demographic that could contribute to the pension fund. Despite this, low female labor force participation and structural problems meant that the contributor base isn’t wide enough to adequately finance the fund.
What’s actually wrong with Morocco’s pension fund
In a policy analysis published in 2013, the Carnegie Middle East Center, a think tank based in Beirut, singles out three main factors underlying Morocco’s pension fund crisis: low labor force participation among women, high unemployment rates, and structural issues with the current pension system.
As of 2013, only 45% of Morocco’s active population was actually employed, with the rate dropping to 35% in 2021, World Bank data suggests. Women’s participation in the labor force fared no better, as it went from 22.7% in 2013 to 21.2% in 2016, with the World Bank warning that it is consistently declining.
The second factor undermining the reserves of the pension fund is the low coverage rate.
Only one-third of Morocco’s working population was registered in the pension fund, compared to 60% in middle-income countries, and 80% in upper-income countries, the policy analysis indicates.
The reason behind the low coverage rates is the even larger problem of a proliferating shadow economy; data suggests that the country’s unregulated economy accounts for approximately 77% of employment.
The third factor is the “fragmented” pension system that limits the number of subscribers, the think tank argues. Among civil servants and employers working for state-owned entities, pensioners are growing at a much faster rate compared to the number of new employees.
The ratio of pensioners to contributors decreased by 50% between 2003 and 2013 and will continue to slide at the current rate, according to the policy analysis.
The government seems to be well aware of the multiple factors triggering the crisis in the pension funds, as they have announced in recent years multiple measures to address the low female participation in the labor force and to facilitate access to the pension fund for workers in the unregulated economy.
However, as the fund continues to bleed reserves, the government seems to prefer opting for the de facto solution of raising the retirement age; a measure that threatens to enrage millions of citizens, similar to what happened enacted the same measure for teachers.
