An Assessment Of Reform Options For The Public Service Pension Fund In Uganda

**Table 4: Government pension arrears**

|**Cat.**|**Estimated**<br>**Amount**|**Description**|
|---|---|---|
|**Forei**<br>|<br>**gn currency l**<br>|**iabilities**<br>|
|**A**|**US$ 12**<br>**mln.**|`Since 1977 pensions to various categories of workers of the East`<br>`African Community have not been paid. As of 2001 these have been paid`<br>`but only pensions related to employees of the East African Airways are`<br>`currently being paid. The due amount was estimated in June 2006at`<br>`US$12 million earning a 7% annual interest.`|
|**B**|**US$ 2.3**<br>**mln.**|`Residual category of East African Community pensions earning 7%`<br>`interest annually. Totally paid as of June 2006.`|
||**US$ 12**<br>|`Total estimate US$ arrears as of June 2006.`|
||**mln.**||
|**Local**<br>|**currency liab**<br>|**ilities**<br>|
|**C**|**UGS 19**<br>**bln.**|`Gratuities to contractual workers, political leaders and commuted`<br>`pensions. There are some 1,200 people in this category`|
|**D**|**UGS 79**<br>**bln.**|`The high inflation since 1987 prompted legislator to amend the Pension`<br>`Act (CAP 286) and introduce wage indexation of pensions in 1995. This`<br>`applied retroactively to all wage increases since 1988. UGS 79 bln is`<br>`what is still unpaid of the liability increase created by the`<br>`introduction of wage indexation.`|
|**E**|**UGS 107**<br>**bln.**|`Pensions to members of disbanded armies.`|
|**F**|**UGS 20**<br>**bln.**|`Survivors’ pensions of defense personnel`|
|**G**|**UGS 17.5**<br>**bln.**|`Local government pensions. Local governments are required to fund`<br>`their pension liabilities through local taxes. However, in 2001, the`<br>`central government agreed to fund the liabilities accrued up to that`<br>`year. The agreement excluded liabilities associated to wage`<br>`indexation of pensions. The financial situation of local authorities`<br>`has not improved since 2001 and local authorities are accruing`<br>`liabilities as per provisions of CAP 286.`|
|**H**|**UGS 20**<br>**bln.**|`Gratuities of ISO/ESO (intelligence) personnel.`|
||**UGS 142**<br>**bln.**|`Total estimate UGS arrears as of June 2006 using exchange rate as of`<br>`06/30/2006 of 1 US$ = UG$ 1,841.`|

**Source** : discussions with MPS officials.

The arrears listed above do not affect our projections. This is because the commuted pension is not paid to new retirees (category C), and the reduced pension, to both new (flow) and old (stock) of retirees, is paid in full. However, the arrears certainly need to be considered as part of the implicit pension debt calculated in the next sections, in order to estimate the total pension liabilities (implicit and explicit) that the government has accumulated.

The reform of the pension system, in general, has been pending with the government for a long time. During this period the Ugandan authorities have benefited from the advice of various parties. The content of large numbers of reports written so far on this matter is summarized in Callund (2004). A draft cabinet paper was submitted to cabinet at the end of the fiscal year 2004/05 detailing general principles for reforming the pension system. Four main issues were covered in the paper: 1) design of adequate regulatory and supervisory framework for all retirement benefit schemes; 2) liberalization of the pension system aimed at promoting choice among covered population and participation of private

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