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Serbs Plead With Govt Not to Push Pension Reforms
Gulf Times Newspaper
June 21, 2005
Serbian pensioners are pleading with the government not to push through plans to slash their already depleted incomes under reforms promised to international lenders. The labour ministry has an end-June deadline to draft the plans to fulfil a pledge to the International Monetary Fund (IMF), which is due to review Belgrade's progress on reforms on June 29 and consider a new tranche of a three-year loan agreement.
The government wants to raise the retirement age from 63 to 65 for men and from 58 to 60 for women by 2009 and index pensions to the cost of living rather than to wages. "The goal is to cut the average pension to 40% of an average salary from its current level of 60%," said Marija Todorovic, chairwoman of the Serbian Pension Fund. Until 2003, when Serbia first launched reforms to meet the World Bank's demands, pensions were 85% of average wages. The average monthly pension today is still only $150.
The Alliance of Serbian Pensioners said they should not be forced to bear the brunt of public spending cuts and other reforms which the government hopes will eventually prepare the country for possible European Union membership. "If reducing us to poverty is the price Serbia must pay to join the European Union, then we don't need the EU, because we won't be there," said alliance chairman Jovan Krkobabic. The average Serbian pensioner dies at 74. The earliest date forecast for EU membership is 2012.
Pensioners are politically important, accounting for 25% of Serbia's electorate. The country has some 1.5mn people in work, 1.0mn unemployed and 1.5mn pensioners. The pension system consumes around 14% of Serbia's gross domestic product (GDP) of $22bn. Total public spending accounts for about a half of GDP.
Todorovic said pensioners should not be viewed as parasites. "They paid contributions when they worked and they deserve a decent life," she said. But the pay-as-you-go system has been heavily subsidised by the state because even state-run firms fail to pay pension contributions. "It is high time Serbia embraced further reform of the pension system ... which has become unsustainable," Labour Minister Slobodan Lalovic told the Novosti daily on Friday.
Some analysts say the proposed changes may be inappropriate in a former communist country which needs many more years to complete the transition to a market economy and has many inefficient sectors that could be trimmed.
They say the timing of the reform may be unfortunate with many workers facing job losses as their firms downsize. "If you look at the region, Serbia is around its average. The retirement age can go up in countries with dominant services sectors. What about those getting older who must carry on working in industry?" said Gordana Matkovic, the researcher at the Centre for Liberal and Democratic Studies. "I can't see spending cuts and serious reform in other areas, such as health and judiciary. They all need money but so do the pensioners," said Matkovic, a former labour minister who rejected radical reform of the pension system in 2002.
To boost pension payments, the government must also tackle the large shadow economy where employers refuse to register workers. Economists believe nearly 700,000 people are affected.
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