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World Bank: Uganda must undertake pension reforms

By Vivienne Russell | 17 June 2014

Uganda needs to overhaul its pension system in order to speed up the country’s economic development and expand social protections, the World Bank said today.

ssuing its fourth economic update on Uganda, the bank noted that the east African nation has a workforce of 15 million people, but only 2.5 million employed in formal wage-paying jobs. Fewer still – just 750,000 ­­– qualify for retirement benefits under current arrangements.

The report, Reducing old age and economic vulnerabilities: why Uganda should improve its pension system, argues that a more efficient pension system would not only help elderly people support themselves after retirement, but also help Uganda to avoid the financial pressures that arise as the number of public pension recipients grow. It would also have the benefit of helping to develop financial markets and secure some long-term finance for investment.

Moustapha Ndiaye, World Bank country manager for Uganda, said: ‘Although Uganda’s economy has remained on a positive growth path despite shocks, its growth policies need to be complemented with social policies to help tackle extreme poverty and inequality.

‘A well-designed and managed pension system can help reduce vulnerabilities at both individual and macroeconomic levels, and can contribute significantly to the country’s ongoing transformation.’

With only 2% of Uganda’s population aged over 60, the country has a ‘demographic window of opportunity’ to build a more comprehensive system, the bank noted.

‘Uganda’s young population presents an opportunity to redesign the pensions system to become a central pillar in the accumulation of domestic savings to not only support economic development, but at the same time provide a safety net against old-age poverty,’ said Rachel Sebudde, senior economist and lead author of the report.

Uganda is currently in the process of planning a comprehensive social protection system and finance minister Maria Kiwanuka acknowledged the shortcomings of coming arrangements.

‘The current public pension scheme is unfunded and does not provide timely access to the benefits by retired workers due to inadequate records, and it also erroneously extends payments to so-called ghost pensioners,’ she said.

‘At the same time, the scheme is very generous and could become unsustainable in the future.’

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