Ukraine bows to pressure from IMF to reform pension system
UKRAINE - President Viktor Yanukovych has promised to overhaul the Ukraine's pension system in a speech in Riga, following pressure from the IMF and the World bank for him to undertake urgent pension reform.
Recent World Bank research indicates that if the situation remains unchanged, the number of working taxpayers will be equal with the number of pensioners in 10 years' time.
The Ukraine currently spends 18% of GDP on pensioners.
Yanukovych said that pension reform would be "very difficult" but that a bill had already been prepared for its implementation. The World Bank has proposed increasing the retirement age.
He said there were currently about 15m retirees in Ukraine, that the ratio of workers to pensioners was reaching a critical figure and that delay in pension reform could lead to social crisis.
The President said the Ukrainian government was aware of the possible political problems that might arise during the implementation of unpopular reform.
Ukraine's prime minister, Mykola Azarov, said the planned reforms would see the pension fund deficit wiped out within the next four years.
Speaking at a cabinet meeting, Azarov said that the pension reform would give people "incentives to work more efficiently, and the economy a huge resource savings of pension funds".
In addition, he pledged that consultations regarding all changes would be conducted with trade unions, employers, as well as citizens, who would be able to provide feedback via ministerial websites.
Ukraine secured a $15.5bn IMF loan programme in July, with the first $1.9bn tranche paid immediately. The Washington-based lender's mission to Ukraine last week recommended release of the next $1bn instalment, providing the government met certain conditions, including implementing changes to the pension system.
The IMF was not available for comment.