LITHUANIA – Lithuanian authorities have drafted a new pensions reform law, which will be passed to the centrist coalition government for consideration in the next two weeks, with support for its implementation expected to follow from the World Bank.

The draft, which follows on from last year’s general election, includes a five percent point contribution to a mandatory second pillar pension.
Currently the total contribution rate is 31%, including 1% from the employee.

“The idea was at the start of the reform that the first thing the government would do is to prepare a separate pension reform law, and then work on other laws and amendments on present legislation within that new framework. So they want to get an agreement in principal from the parliament, a concept on what kind of a pension law they want to have and the main parameters for it. Based on parliamentary support they would work on more details,” says Vilija Kostutelnickiene, a social affairs specialist at the World Bank in Vilnius.

The World Bank has been involved in earlier state reforms in Lithuania, providing technical support and administrative advice.
Last week in Helsinki, the Lithuanian finance minister Jonas Lionginas and deputy finance minister Mindaugas Jonikas met World Bank president James Wolfensohn to discuss further assistance. The finance minister has worked out several scenarios for the planned reform. It has been estimated that the state-run social insurance fund, Sodra, may reach a deficit of around LTL500m in the first year of the reform.

“World Bank has been providing technical support already, and so far the minister is asking for further support. However, it is not clear what kind of operations this will involve, whether it will involve large-scale hardware support with a lot of technical assistance or just modest technical support,” says Kostutelnickiene.

It is planned that the system of mandatory contributions to private cumulative pension funds will start to function in 2003.