Банкеръ Weekly

Briefs

IMF HAS COOKED UP RETIREES' POCKETS

The draft budget of the Social Insurance Institute (SII) projects pensions to go up 7% as of June 1, 2005. In the future the percentage of indexation will be 75% of the inflation rate and 25% of the insurance income. Thus, the increase is rather bound with the hike of prices, SII Chairman Jordan Hristoskov underlined in front of the BANKER weekly. Nevertheless, the purchase ability of some groups of pensioners will in fact go down if commodities' prices increase by a higher percentage than that of the measured average inflation rate. He specified that NII experts had insisted on accepting the so-called golden Swiss rule. It projects that the growth of pensions should be equal to half of the inflation rate plus half of the increase of incomes. Thus, according to financiers, more money for retirees will be guaranteed, as the raise of pensions will be following the growth of wages in the budget and private sphere. However, NII's proposal was rejected by the Government on the insistence of the International Monetary Fund (IMF). Mr. Hristoskov believes that concessions for other financial parameters might have been agreed at the expense of the new formula for calculating the indexation of pensions. In 2005 the average pension in the country will be BGN133 (about USD79). In the countries which joined the European Union (EU) most recently the respective amount varies from USD87 in Lithuania to USD409 in Slovenia. The percentage of the insurance burden for employees and employers will also change as of next year. Employees currently pay 25% of the due insurance, while in future they will be paying 30 per cent. After that change some BGN20MN will remain with the employers. A breath of fresh air for the entrepreneurs will be also that they won't be paying insurances on the money for sick-leaves and maternity benefits. That will release another BGN39.8MN, calculations of NII show. At the same time, expenditures of NII's budget will go up by the same amount as that money will be payable by it. The percentage of the insurance instalment for the Unemployment Fund will go down from 4 to 3.5% in 2005. At the expense of that, 0.5% of the labour remuneration will go to the Guaranteeing Workers' and Employees' Receivables Fund. The money collected in it will be used for paying the wages to personnel of insolvent firms or enterprises. The continuing restructuring of the economy and the increase of people employed in the private sector could result in a decrease of the proceeds from insurance instalments, SII experts point out. Their stance is that the stop of operation and the non-rhythmical payment of wages and social instalment due on them, will lead to a decrease of SII's funds. The growth of intercompany liabilities has been pointed out as another negative factor for social insurance. There are risks as well in the increasing demographic crisis. Currently, the ratio between employed people and pensioners is 100 to 102. Accrued debts from unpaid social insurances also influence SII's finance balance. According to projections, receivables of about BGN90MN should be collected next year. For improving collectability SII will rely more heavily on the tax administration and the State Receivables Agency. More severe sanctions for non-prompt payers will be introduced as well, Mr. Hristoskov said. Between voting the draft bill on healthcare insurance on first and second reading, the SII will propose specific measures for collecting the due healthcare instalments. Sending invitations to debtors for voluntary payment of the overdue amounts is among the considered options. A new telephone line for inspecting the healthcare status will be activated in the SII within a week. Software will be developed also, by which hospitals and GPs will get information about the rights of patients, included in their lists.

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