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Higher retirement age to cut Slovakia spending

SLOVAKIA – The recent rise in the age of retirement age should enable the government of the Slovak Republic to make savings, the International Monetary Fund said.

“As regards pensions, the government should obtain savings in spending as a ratio to gross domestic product through the recently approved increase of the retirement age by nine months in 2004,” the IMF said in a report.

“The most important savings from the reform of the first pillar pension system should be realized longer term.”

The IMF visited Slovakia earlier this month to and discussed fiscal policy for this year and the next with the authorities.

“Recent economic indicators suggest that strong growth is continuing, macroeconomic imbalances are narrowing, unemployment is declining, and core inflation remains low,” the report adds.

And it said that although contribution rates for social insurance will be reduced in 2004, the lower revenues are budgeted to be offset by savings from reforms to the social insurance system.

Slovakia is in the midst of overhauling its entire pensions system. It is to introduce a second-pillar privately funded plan alongside changes to its existing first and third pillar systems. The changes are being driven by Slovakia’s increasingly ageing population, an unemployment rate of nearly 18% and the prospect of increased labour mobility after Slovakia joins the EU in 2004.

The second pillar law is closely modelled on Chile’s three-pillar system. Earlier this year finance minister Ivan Miklos said the country was a transformation in its current pay-as-you-go system.

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