The recent rise in the age of retirement should enable the government of the Slovak Republic to make savings, the International Monetary Fund says in a report.
“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 says.
“The most important savings from the reform of the first pillar pension system should be realised longer term.”
The IMF visited Slovakia to discuss fiscal policy for this year and 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 undertaking a transformation in its current pay-as-you-go system.