Soundness of the social security system depends on careful consideration of the impact of each policy or financial decision on the balance of financial inflows and outflows now and most importantly in the future. Sensitivity of such policies and decisions increases in Kuwait as the balance of these funds both now and in the future depends predominantly on the public finance conditions. While the retirement umbrella currently covers about 135 thousand citizens, the civil servants number is 335 thousand workers and 100 thousand citizens working in the private sector have to be added. Citizens who are candidates to the labor market until 2035 are estimated to 420 thousand citizens, who are currently not included, are the future requirements and stability of the system.
The balance of pension funds means that they should be able to increase their financial inflows to be able to meet at all times the needs of the increase of labor inflows to the retirement umbrella with the probability of increasing the pensioner’s compensation from time to time whenever inflation rates rise.
Controlling balance of the financial inflows comes from two sources: workers’ contributions, most of which come from Kuwait’s public finance and not from a sustainable economic activity, and from the income of the investments of these funds, which should not be less than 6% annually. Controlling balance of outflows comes from the concern for justice among generations which means that compensation is not biased in favor of one generation simply because it has the decision-making authority which causes a deficit to be paid dearly by future retirees.
The current securities system in Kuwait is affected by more than one source. First, the public finance is exhausted due to the present generation’s mismanagement. Second, income from securities investment funds is weak at 5.68% for the fiscal year 2017/2018 and fell to 3.97% for the fiscal year 2018/2019. Finally, it suffered lately from incredible corruption. To punish the government officials and securities’ officers for that bad performance, populist policies to buy out the political allegiance of the current generation pensioners broke out in a manner which would sell the stability and security of all future pensioners. Their punishment will be harsh and swift if the public finance conditions are not fixed.
The last report on the actuarial deficit volume submitted last week by an independent body estimated the deficit at KD 17.4 billion, or about 11% of the value of future generations’ reserves. The true shock was the surge in that deficit which scored about 90%, or KD 8 billion of that deficit in just three years. The condition of the tributary or supporting source, i.e. the public finance, is not any better after oil prices are facing what is assumed to be a permanent weakness. For the first time in almost 25 years, the final account for the fiscal year 2018/2019 is issued at 13.5% higher actual expenditures than the previous fiscal year. For the sake of warning, though it is unrealistic, if the next three years achieve an increase in the actuarial deficit similar to that achieved in the last three fiscal years, i.e. 90%, the actuarial deficit will score KD 33 billion. And if the actual expenditures growth continues at the same pace as in the final account of the past fiscal year, public expenditures will amount to KD 33 billion after three years. This is only an indication of the potential future disasters. That is not anyone’s conspiracy but is a local institutional industry whose heroes are the two wings of the public administration: the executive and the legislative.
Ultimately institutions are not made by and their goals are not achieved by a building, organizational structure and a budget but are made by human beings who are loyal to an everlasting homeland and their policies are governed by noble public goals. What has made the Public Institution for Social Securities in the past an example to be followed was not the magnitude of the first three components, namely, a building, an organizational structure and a budget, but the distinctive quality of humans who founded it and governed its systems and values, we truly miss the likes of the late “Hamad Al Joa’an” and “Meshari Al Ossaimi”.