Maldives needs to drop double pension for economic reforms: Palacios

World Bank has recommended Maldives to drop double pension to mitigate potential economic risks.

While speaking at the Maldives Finance Forum 2024, organized by the Maldives Pension Administration Office (MPAO), the Senior Economist of the World Bank Robert Palacios stressed the pension system in Maldives is not sustainable, and suggested rectifications.

Speaking on the topic of “A Sustainable Pension System”, Palacios highlighted that 13 government offices receive double pensions, out of which the state spends the most on security forces – Maldives National Defense Force (MNDF) and Maldives Police Service.

Double pension occurs when employees receive other allowances besides the dedicated retirement pension scheme.

Palacios suggested completely dropping the double-pension system while subsequently cutting pension benefits by 10 to 20 percent for the richest retirees. He further noted that the twice-high pension allowances for retirees besides basic pension plans due to double-pension were obstructing the system’s sustainability.

World Bank had earlier made the same suggestion as well while both domestic and international financial institutions raised concerns regarding high state expenditure incurred to provide various pensions allowances to police and military personnel.

The bank also recommended Maldives to act promptly on making fiscal reforms, and highlighted the debt and economic risks the country faced.

While the World Bank initially projected Maldives' economic growth rate at 5.2 percent, the bank later revised and lowered the rate to 4.7 percent in light of mounting debt risks.