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The effects of privatisation and liberalisation of the economy on the actuarial soundness of the Egyptian funded and defined benefits social security scheme

Egypt is advancing in the process of transition from a planned to a market economy, as it is currently immersed in the process of liberalisation of the economy and privatisation of the public sector. This process is accompanying the development of capital market and financial institutions in their early stage. This might require some radical changes to the public social insurance pension system. Social security constitutes an important element in the current transformation. This paper describes the operation of the funded defined-benefit Egyptian public social insurance pension system. The system is operating under the aim of maintaining an actuarial equilibrium within the fund. But the scheme has been in a deficit over the last three decades as a result, mainly, of the investment strategy concerning the fund assets. The government is responsible for investing most of the funds through the National Investment Bank (NIB). The system’s assets are used to finance national projects and the interest rates provided on the funds are always below market rates. This paper discusses also the effects of unemployment and the government’s strategy of encouraging early retirement on the actuarial soundness of the system.