Pension System Reform in Egypt

16-03-2004
Author(s): Omneia Helmy
Publication Number: ECES-WP94-A

Abstract:
This paper analyzes the pension system in Egypt, with the purpose of making a set of proposals for reform, taking into account the interests of employees, pensioners, and the national economy. The paper finds that although the current pension system has many advantages and is not facing financial difficulties, there is a need to increase its economic efficiency and enhance its long-term financial sustainability.
Drawing on international experience, the paper offers a number of concrete proposals
for Egypt. In the short run, it suggests changes in the benefits and contributions structure, developing an automatic pension indexation mechanism, and modifying current legislation to allow for the efficient investment of pension funds. In the medium and long runs, the paper stresses the need for a gradual shift toward a fully-funded defined-contribution pension system, while maintaining the role of the state in protecting the poor, preserving pensioners’ rights, and developing the necessary legal and regulatory frameworks.

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