IMF Staff Country Reports

This Selected Issues paper assesses Iraq’s national pension system by examining the fiscal burden of budget-financed pensions and providing a sustainability analysis of the contributory pension scheme for public sector workers. It also outlines reform options that can assist the authorities in containing the fiscal burden of the pension system, improving its adequacy, and reducing labor market distortions to remove barriers to private sector growth. The fiscal costs of budget-financed pension schemes are expected to remain elevated. A well-crafted transition plan will be key to the success of pension reforms. A gradual transition to a system with rules that are in line with international social security standards and best practices will loosen political economy constraints. Ensuring that the reform has the buy-in of a large group of stakeholders across the bureaucracy, political leadership and employees will increase credibility and protect it from political pressures during electoral cycles.