World Bank Supports Strengthening Pension and Social Protection Systems in the Maldives

13/05/2009 11:41  (02:29 minutes ago)

The FINANCIAL -- The World Bank on May 12 approved a US$3.8 million credit to assist the Government of Maldives to revitalize its pension system and provide additional social protection programs under a new implementing authority.

“The introduction of a new pension scheme will provide a degree of income protection for the  elderly  and is a much needed progressive step for Maldives, as at present the majority of workers do not participate in a pension scheme of any kind,” said Naoko Ishii, World Bank Country Director for Sri Lanka and the Maldives.” This project will also lay the foundation for other social protection programs being considered for the medium term.”

According to World Bank, the system to be introduced under the Pension and Social Protection Administration Project will strengthen the capacity for implementing the new pension program by: (a) strengthening capacity for policy analysis and legal framework; (b) institution and capacity building for project implementation; and (c) co-financing for the Public Accounting System (PAS). A public information campaign will be designed to educate the public on the new pension system and the Ministry of Health and Family (MOHF) will implement this with the project providing supporting technical advisory services, goods, and training.

“Currently, the pension system in the Maldives covers only public sector employees, but it does so through a significant subsidy at a high cost to the government for workers who participate,” said Robert Palacios, Senior Economist and co-task leader for the project. “The project aims to make this system more financially sustainable and to expand coverage to the rest of the workforce over time.”

Furthermore, the project will provide additional funding for the implementation of a Public Accounting System (PAS) in the Ministry of Finance and Treasury. The PAS was initiated by a grant from the European Union.

“The PAS is a vital component of the project and will modernize the country’s public financial management, including financial reporting functions, payroll systems, budgeting processes, interfaces between agencies, and, specific to this project, tracking of pension contributions for government employees,” said Oleksiy Sluchynskyy, Senior Economist, and co-task leader for the project.

The project is consistent with the Bank’s Country Assistance Strategy objective of improving social protection which is critical for both human development and long-term fiscal stability. The US$3.8 million credit from the International Development Association, the World Bank’s concessionary lending arm, has 40 years to maturity with a 10-year grace period.