BELGIUM – The Belgian government’s takeover of the Belgacom pension fund has been criticised by the International Monetary Fund as an “ad hoc” measure which masks the country’s true fiscal position.

“The current framework that relies on maintaining balanced budgets has served as a valuable policy communication tool,” the body said.

“However, it is resulting in a growing pursuit of ad-hoc fiscal policy measures - which are likely to be needed again to achieve balanced budgets in 2005-06, whereas an approach focused on the underlying position would likely allow for small deficits in these years.

“Such ad-hoc measures mask the true fiscal position, sometimes trading off a current benefit for future outlays (e.g., as in the case of the takeover of Belgacom's pension fund and sales-and-lease-back operations for real estate).”

The Belgian state is set to take over the assets of Belgacom’s 3.6 billion-euro pension fund in preparation for an initial public offering of the company next year. The move has seen 10 investment managers lose their mandates.

The IMF says it supports the government’s new agreement on job creation and public debt reduction. “The government agreement recognizes that addressing the long-term pressures from ageing calls for additional fiscal consolidation.”

“In a longer-term perspective, the challenge from ageing is becoming more pressing,” the IMF added. “Recent government decisions applying to the social security system will lift the projected cost of aging above earlier estimates, in particular owing to the increase in health care spending, which already requires a strong compression of expenditure growth in other areas.”

And it repeated its call for early retirement incentives to be removed. “Without phasing out the generous early retirement system, it is unlikely that the much needed increase in activity rates of older workers can be achieved.

“Over time, all tax incentives and public spending on early retirement will need to be removed. In this context, the elimination of some tax benefits favouring early retirement is a helpful first step.”