Social Pensions for the Elderly in Asia : Fiscal Costs and Financing Methods

There is a strong consensus that social pensions can potentially play a significant role in reducing old-age poverty in Asian countries. This chapter examines the determinants of the short- and long-term fiscal costs of social pensions in Asia, and avenues for enhancing fiscal space for financing these pensions. The analysis suggests that in the short and medium term (3-5 years), additional fiscal space equivalent to 1%-1.5% of gross domestic product (GDP) will be needed, and 2%-2.5% in the longer run.The long-run fiscal costs of social pensions will be influenced by factors such as demographic trends, behavioral responses, political economy, and public aspirations and expectations. The extent of the needed fiscal space can, however, be moderated by better design, implementation, and governance of social pensions, and their coordination with the rest of the pension system.To enhance fiscal space, generating the requisite reallocation of budgetary expenditure and improving its outcome orientation, as well as obtaining additional revenue from conventional and nonconventional sources, are needed.The chapter suggests that those Asian countries that find an appropriate balance between development and the fiduciary perspective of fiscal space are more likely to be successful in using social pensions as an important instrument for reducing old-age poverty