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The Fiscal Burden of the Legacy of the Civil Service Pension Systems in Northern Cyprus

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Disciplines
  • Political Science

Abstract

This paper estimates the fiscal burden of the Pay-As-You-Go (PAYGO) civil service pension systems that were closed in 2008 to new members in North Cyprus. At that time, a new pension system was introduced for the newly hired government employees and new private sector workers. Estimates are made of the difference between the present values of future contributions and the pension benefits. This approach measures the government’s net liabilities related to the accruals of the pension rights received by the individuals covered through these plans for the period from 2009 to the death of the last member in the system. The estimated unfunded cost of these civil service pension plans is 7.3 billion euros or 276% of GDP. This amount of implicit debt is significantly higher than 5.8 billion euros that has been estimated as the amount of cash compensation for land and property that would need to be paid in order to reach an agreement for a solution to the Cyprus conflict.

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