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Turkey expects approval for pension reform

TURKEY – The Turkish government says it expects parliament to approve the new pension reform law by the end of June.

“Parliamentary passage of the pension reform law is expected by end-June ,” government officials said in a letter to the International Monetary Fund.

Economics minister Ali Babacan and central bank governor Süreyya Serdengeçti said that “following an extensive consultative process”, the government has prepared a package of three reform laws.

A draft pension and health reform introduces parametric changes “while harmonizing the pension formula across occupation groups”.

They added that the reform also reorganizes the fragmented system into “one unified pension fund and one unified health fund”. And administrative reform would unify the governance structure of pensions, health and social assistance programmes.

The letter added that the pension reform aims to reduce the pension deficit to less than one percent of gross national product over the long term.

“Savings will come from a unified pension formula that bases all pensions on life-time earnings, modification of key pension parameters, a broadening of the contribution base, and adjustments of the statutory retirement age to lengthening life expectancy.”

The IMF yesterday approved a $10bn loan to support Turkey’s economic and financial program through to May 2008.

"Turkey's economic performance is at its strongest in a generation,” said IMF chairman Rodrigo Rato. “Growth was 8% on average over the last three years, while inflation has fallen to single digits, its lowest level in more than 30 years.”

Turkey also said it would continue to broaden the investor base for government bonds. It would explore avenues to “raise the demand among pension and insurance funds, corporations, retail investors and foreign investors”.

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