The Government of Djibouti has committedto reform its pension system in order to restore financialsustainability and improve management. To this end, itrequested the World Bank to elaborate a pension reformstrategy that identifies the major financial andinstitutional constraints facing the pension funds andexplores restructuring options. This policy note summarizesthe major diagnosis and policy recommendations of the study,reflecting comments from government officials and theBank's technical experts during the internal reviewmeeting held on March 15, 2001. In the case of Djibouti, atwo-stage reform program is proposed. A first stage wouldconcentrate on consolidating a modest pay-as-you-go system,and involve executing three major activities: 1)implementing institutional reforms to improve governance andmanagement, and to generate efficiency gains that enhanceservice delivery and reduce administrative costs; 2)addressing short-term financial needs by normalizinggovernment contributions, defining a plan to refinancegovernment arrears, and introducing a ceiling for thereplacement rate in the regime for parliamentarians; and 3)improving the medium-term financial situation of the pensionfunds. A second stage of the reform program would focus onmerging the Social Protection Organism (OPS) and theNational Pensions Fund (CNR); and introducing/reinforcingincentives to promote contractual savings.
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