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Turkey says it plans “ambitious” pension reform

TURKEY – The Turkish government says it plans “ambitious” institutional and parametric pension reform as part of a wider bid to meet EU standards.

“We are updating our assessment of the fiscal implications of planned social security reforms as well as analysis aimed at identifying additional savings,” the government said. The moves were part of “a comprehensive agenda for structural reform” guided by its commitment to converge towards European Union standards.

“In the area of pensions, this would include institutional reform of the three existing systems and parametric reform, to move the system to long-run sustainability,” the government said.

In a ‘letter of intent’ send to Anne Krueger, the acting managing director of the International Monetary Fund, Turkish officials said that by the end of June, “we will develop a range of ambitious reform options, run the associated simulations, and present the findings to the Council of Ministers.”

The letter, signed by Ali Babacan, minister of state for economic affairs and Süreyya Serdengeçti, governor of the Central Bank of Turkey, said that the country would “adopt a rules-based approach to increasing pensions based on the new social security framework”.

They said that no further increases for pensions – other than the already announced 10% increase in July – were planned this year.

And they added that any deficits in Turkey’s social security institutions would be covered by transfers from the central government budget. The social institutions were expected to be in “primary balance” in 2004.

“Following a year of successful macroeconomic management under our Fund-supported program, the economy is now at its strongest in a generation,” the officials told the IMF.

“To build on the achievements of 2003, we are deepening and advancing the economic reform agenda.”

They added: “The reforms that are detailed in this letter are aimed at putting the fiscal accounts on a more sustainable medium-term footing, moving the banking sector further in line with best international practice, and facilitating private sector development and investment.”

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