IMF tells Ukraine to tackle pricey pension system
The International Monetary Fund The International Monetary Fund
The IMF’s chief to Ukraine told Kiev on Tuesday its pension system was unsustainable because it supported nearly a third of the population and must limit the number of retirees. The International Monetary Fund has long pressed Ukraine to tackle its budget-draining social welfare programme for retired workers as part of a broader overhaul that could get future lending from the West back on track.
“The discussion of pension system reforms has been delayed for too long,” Ukraine’s IMF mission chief Ron van Rooden told the Ukrainska Pravda news website. The former Soviet country is clawing its way out of a deep two-year recession that was fanned by heavy spending on fighting a Russian-backed eastern separatist insurgency in which Kiev’s major industries fell into rebel hands. But its needs foreign financial help to repay outstanding loans and pursue an economic policy that could temper inflation while achieving sustainable growth.
The Ukrainian government has strongly resisted raising its pension age — which now stands at 57 for women and 60 for men — because the measure is deeply unpopular with voters who have already seen many of their social benefits cut.
The proposal would also have trouble passing a parliament in which populist and nationalist lawmakers hold a considerable share of the seats. Yet van Rooden stressed that the pension system remained a considerable concern because it supported 30 percent of the population and was operating at a loss.
“Ukrainians retire much earlier than workers in other countries in this part of the world,” van Rooden was quoted as saying.
“The average pension age for men is 58.5 years, and for women — slightly more than 56.” He said both figures were about five years below the European Union average.
Van Rooden did not explicitly say that Ukraine must raise its pension age or that such a requirement was a precondition for future loan disbursements under a USD 17.5 billion (16.4 billion euro) programme agreed in 2015.
He suggested that the number of pensioners could be reduced by limiting the number of early retirements. Van Rooden added that the system must be filled with more money by targeting companies and enterprises that avoid paying their pension tax.
Ukraine hopes to secure another $4.5 billion from the Fund this year. But the IMF warned when releasing its last USD 1.0 billion tranche payment in April that Ukraine “has to do much more to recover the lost ground… and to build a modern market economy.”
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