Page 2 - Issue NO-2-Study on the design and implementation of macroeconomic and structural policies and reforms in Tunisia

Q U A R T E R 2 - 2 0 2 5 | I S S U E N O . 2

•Dynamic Stochastic General Equilibrium (DSGE) model The main advantage of this type of modeling, being
for the analysis and evaluation of active economic widespreadly used, lies in its ability to provide
policies. quantitative assessments of the effects of economic
•Structural Vector Autoregressive (VAR) forecasting policies, thereby offering a comprehensive tool for
model for the analysis of the impact of public debt on medium- and long-term simulation.
economic growth. Three categories of reform were studied using the
•Dynamic Factorial model for short-term economic model:
growth forecasting. • Parametric reforms, which, without challenging the
•Computable General Equilibrium (CGE) model for the structure of the system, explore contrasting scenarios by
evaluation of the impact of planned or implemented considering adjustments affecting the main resource
macroeconomic reforms. and employment parameters: retirement age,
•Overlapping Generations model (OGL) with analysis of contribution rate, minimum contribution period,
the social security system with practical application to pension indexation rules, reference salary, annuity rate,
pension reform. etc.;
•General Equilibrium model for the analysis • Structural reforms, which consist of broadening the
convergence strategies toward the Sustainable contribution base for funding pensions beyond wage
Development Goals (SDG-MEG) and the evaluation of income.
related policies. • Mixed reforms, combining parametric and structural
•Input-Output model for the evaluation of the direct and reforms.
indirect effects of structural reforms.
•Cost-Benefit model for projects and programs
evaluation.

In this article, we rather focus on the results of the OGL The results of the simulation of the reference
modeling work for the analysis of the social security scenario, assuming no change in legislation, show that
system with practical application to the issue of pension the budget balance, which has been in deficit since the
reforms. base year, would continue to increase throughout the
Indeed, the pension system in Tunisia faces significant simulation period, leading to a real threat to the
challenges that could impact its viability and its ability pension system sustainability. The deficit of the funds
to fulfill its commitments to current and future retirees. would be established by 2050 at 10.4 M.TND, or 9% of the
For more than a decade, social security funds in Tunisia GDP compared to nearly 2.5% in 2021. The deterioration
have been facing a gap between revenues and of the CNRPS balance is accelerating more rapidly than
expenditures, which has led to ever-widening financial that of the CNSS due to the decline in the demographic
deficits. Therefore, the main objective of this study is to ratio.
provide thorough analyses of pension funding reforms After simulating a set of reform scenarios, which proved
that can inform public policy for the effective ineffective in balancing the pension system's revenues
management of pension systems by exploring possible and expenditures, it became clear that a fundamental
funding methods, their effects on the funds' financial reform of the current system is required.
stability, and their socio-economic impacts. It has been proposed to adopt a “careful balance”
To consider the interaction of economic agents' between the various alternatives to preserve efficiency,
phenomena and behaviors (savings, consumption, solidarity, and equity.
supply and demand of labor, etc.) and their outcomes on This is the purpose of the mixed reform scenario, in
economic variables and the characteristics of the which all qualitative, parametric, and structural reform
pension system itself, a general equilibrium approach measures were combined (optimization of recovery,
was adopted. The intergenerational transfer nature of increase in the CNSS pension contribution rate, a slight
pension funding phenomena argued in favor of reduction in the CNRPS and CNSS replacement rate, a
developing and using a Computable General gradual increase in the retirement age by two years for
Equilibrium Model with Overlapping Generations (OLG- the CNSS, a CSS and/or consumption tax).
CGEM) adapted to the Tunisian context. CONCLUSION
AND ECONOMIC POLICY MESSAGES

.Recommendation No.1: It is necessary to diversify the pension system’s funding sources by broadening the contribution base
for funding pensions beyond earned income.
.Recommendation No.2: This line of thinking would consider that the care of the elderly in aging societies is a public service that
should be provided by the entire national community and would, in a way, align with analyses surrounding universal income.
.Recommendation No.3: The measures envisaged could be further consolidated by strengthening good governance in the
management of funds and digitizing services, which simplifies administrative procedures and helps improve the efficiency of
collection.
.Recommendation No.4: A social solidarity contribution without consumption tax would be ranked second from an economic
standpoint and third for considerations of collective and affiliate welfare.
.Recommendation No.5: A mixed reform with a consumption tax would be ranked third from an economic standpoint and
second for considerations of collective and affiliate welfare.
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