Pension System Sustainability: Towards a Multidimensional Reform INCLUSIVE GROWTH FOR TRANSIONIAL MENA COUNTRIES MEEA 14 th ANNUAL CONFERENCE March 23-25, 2015 Hammamet, Tunisia Increasing PAYG pension systems deficit Deficit Unfavorable economic conditions High unemployment Low wage growth Inflation Fertility Life expectancy Ageing Population Ageing Population Computable General Equilibrium Model with Overlapping Generations Structure Intergenerational transfers Intergenerational transfers Changes in population structure CGEM- OLG Computable general equilibrium model with overlapping generations: Auerbach and Kotlikoff (1987) Rutherford and Ramussen (2004) Equilibrium Conditions State (Pension system ) Producers Households Stages of the empirical analysis Pension System Perspectives Under Unchanged Structure 0.7% % % 2030 Pension system deficit (% of GDP) Unsustainable situation Reforms Pension system sustainability in the long termMaintaining standards of living for pensionersAllow social coverage extension. Safeguarding acquired rights up to the date of the reform contributive capacity of employees and employers Contribution rate Parametric reforms Remplacement rate Retirement age Complementary funded system Contribution rate increase: reduce economic growth through the distortion on saving behavior. 36% in % in % in 2040 Pension level decrease: decline in the purchasing power of pensioners Retirement age increase : alleviate social contribution burden. Complementary pension funds: positive effects will take several years to be realized Pension system equilibrium No negative effects No solution Simulation results Parametric reforms Funded pillar Impasse The situation of the pension system is an undeniable urgency. A wide-ranging reform Sustainability of Pensions: Towards a Multidimensional Reform Policy conclusions