In an attempt of encouraging domestic saving and encourage investment, Ethiopian government is set to introduce private sector social security scheme.

As of January 2011, all employees in the private sector are obliged to save 5 percent of their salaries while their employers will contribute 11 percent, which will go to provident fund account of the companies.

Prime Minister Meles Zenawi told the parliament this morning (December 2, 2010) that the current government employees’ social security system will also be adjusted to 5 and 11 percent and will be uniform with the private sector social security scheme.

He made the remark in response to the parliamentarians while briefing on the funding sources for the full implementation of his government’s five year Transformation and Growth Plan (TGP).

Meles who commented on the ‘ambitious’ TGP of the country that the House passed today, also indicated that local bank saving interest rate will also be adjusted in order to encourage saving.

Meanwhile he didn’t mention his government’s plan by how much percent to raise the current 5 percent minimum saving interest rate of banks. In addition, he also noted that new local saving schemes such as Residential Hose Construction Saving, Investment Weapons Saving will be introduced soon along with attractive interest rates.

Government saving Bond will also be sold in every part of the country for people who are interested to use the bond as collateral to get loan from any banks in the country, according to Meles.

New Business Ethiopia (http://newbusinessethiopia.com/index.php?option=com_content&view=article&id=336:ethiopia-to-make-private-sector-social-security-mandatory-&catid=31:investement&Itemid=7)

I am skeptical about this. Saving is always good, but there are so many people that can barely pay their expenses at it is today with ever increasing food costs etc.

i'm surprised to see them say up to 11%... and the use of the word scheme makes it seem negative lol

I think it's an excellent idea, it will force people to save money. Although implementing it might be difficult. I can completely see some small business owners trying to take all 16% of the money from employees' salaries ...

Great idea, these kind of programs are the innovative stuff that make a difference. Reality is most people are too poor to be able to save 5% each month, but for middle and upper class people in the formal economy this should be implemented. Create a social security account and each month 5% of your paycheck goes to that account. It creates security when times are hard, I think you should be flexible in using that account, not just until your retire.