February 27, 2009
BAGHDAD, IRAQ – The U.S. Agency for International Development (USAID) handed over management for pension reform assistance to the World Bank today. USAID’s economic advisors, in conjunction with its Iraqi counterparts, drafted a progressive pension law and introduced structural changes to deliver sustainable and adequate retirement incomes for past and present Iraqi government employees.
Pension payments account for the largest share of social security spending other than food ration subsidies in Iraq. The old pension system was managed in a centralized, closed market economy, with little contact with the rest of the world, which lead to great inefficiencies. Iraq’s wage-earners faced problems in terms of limited coverage, weak administration, and system design that negatively affected incentives and equity.
In June 2005, USAID’s economic advisors, in concert with their Iraqi counterparts and the World Bank, delivered a strategy outlining a sustainable pension plan that included registering employees, collecting accurate data for contributors and contributions, and providing effective control mechanisms. The joint pension reform effort took into account Iraq’s move to a market economy and the role of an expanding private sector. As a result, the Pension Reform Law was passed by the Iraqi parliament in 2006 and revised in December 2007.
The Iraqi government established the National Board of Pension (NBP) in 2008, a semi-autonomous agency to manage and administer all major government-sponsored pension systems. The NBP worked with USAID to update skills of senior managers by incorporating best practices in management and administration. With support from USAID’s Economic Governance team, the Iraqi government amended the Iraqi State Pension Law that covered civil servants, the military and security forces, and employees in state-owned enterprises, addressed inconsistencies in the pension system, and secured provision of the Stand By Agreement (SBA) with the International Monetary Fund (IMF). USAID invested $4 million for the nearly four-year project.
“The successful efforts of USAID in legislative reform, capacity building, business process documentation and redesign, and IT infrastructure offer a solid foundation for the Government of Iraq’s National Board of Pensions. We are confident the NBP will continue to build on its gains and attain a solid pension administration and recordkeeping system consistent with leading international practices,” said Mervyn Ellis, director of USAID’s Economic Governance Team.
Since 2003, USAID has invested more than $6 billion on programs designed to stabilize communities; foster economic and agricultural growth; and build the capacity of the national, local, and provincial governments to respond to the needs of the Iraqi people.