Reforms save pension scheme from collapse

“With the old scheme, the deficit of the retirement pension in 2015 would have been 26.6 billion ALL, while with the new scheme, that deficit would be decreased with 5.3 billion ALL. The deficit for 2015 will be 21.3 billion”, declared Vjollca Braho, Director of the Insurance Institution.

The deficit of the pension scheme reached its historic record in 2013 at 1.8% of the GDP, due to the increase of the retirement pension while revenues from contributions were dropping. According to the calculations of the Ministry of Labor, the deficit will be dropped to 1.6% with the new scheme, and to 1% within five years.

“We expect to have a reduced growth of subventions and free more money for investments, schools, roads and public works, and less money to subvention a scheme that has been out of control, especially from 2005 to 2013”, declared Erion Veliaj, Minister of Social Welfare and Youth.

The Ministry of Labor bases most of this improvement on the expectancies that the right connection between contributions and profits makes the scheme more attractive and will attract more people who can contribute in it.

The IMF notes that there is another more pessimistic variant. IMF experts who have studied the scheme proposed by the government say that if the number of contributors will not increase, the new scheme will generate fewer savings and will still have a high deficit, respectively at 1.6% of the GDP for the next 10 years.

According to the IMF, even this improvement will come from te increase of the payment limit, on which contributions will be calculated. But in both cases, the experts of the IMF welcome the reform of the scheme. They say that without an intervention, the current pension scheme would have threatened the budget and inancial stability of our country very soon.

Top Channel