18 August 2017, Friday, 21:17

The Regime "Ate away" Pensions of Belarusians

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CARTOON MADE BY CARTOONBANK.RU

Why pensions in the EU neighbouring countries are much higher.

Economist Leanid Zlotnikau told in the interview with Charter97.org.

- The Social Security Fund of Belarus has made a big "hole" of more than $150 million. How does it effect the economic situation in the country? What will happen to pensions of Belarusians?

- It is caused by the situation in the Belarusian economy and the society. The deficit in the pension fund is the result of the social structure developed under Lukashenka. The economy we derived from the Soviet Union was not later reformed by the government but "eaten away".

Well, the government tried to "modernize" something, but it was like in a bad joke - everything failed. As a result, both money and credits were eaten away, and there is no "modernization" until now.

Being afraid of requirements to raise salaries, both Lukashenka and the government "put out" popular discontent at the expense of strategic resources. It worked for some time, but it turned out at a certain point that financial resources were "eaten away" and huge debts were accumulated. And along with it pensions of Belarusians turned out to be "eaten away".

Now the government has only tidbits of the legacy and opportunities for "eating-away" have declined sharply. No one gives a credit, and if it given it means a high interest. And these sops are not enough to maintain the previous level of social costs.

As a result, we can see such a "hole" in the pension fund.

Of course, there is also an objective reason related to the demographic situation. Belarus is now entering the third post-war demographic wave associated with a significant decrease in the birth rate. As a result, the number of economically active population against those retired is less than before. This also involves a shortage of money in the pension fund. But the developed countries of the West also enter this "third wave". Nevertheless, they perfectly manage the issue of pension provision, and our government does not.

- What is the reason for it? What will be actions of the Belarusian authorities?

- The Belarusian authorities act unreasonably, they simply raise the retirement age. And this gradual increase will continue. But it will not solve problems with pensions. A fundamental reform of the pension system is required. The one that was done in Latvia and the Baltic States.

The Belarusian pension system remained the same as it was in the USSR. This system is based on the so-called "generation solidarity": a part of the salary is deducted to the pension fund from an economically active population and this money is given to retirement people.

However, the entire developed world has already had a completely different system. The "generation solidarity" there is miserable and is aimed at establishment of only social pensions. And the great part of pensions they accumulate on their own: both an employer and an employee make deductions to private pension funds, where this money becomes the property of the future pensioner. The accumulation system has proved to be much more effective in the situation of demographic decline.

Latvia, for example, began the transition to a funded system 25 years ago.. To date, there remains a small part of deductions based on "generation solidarity", and an essential part of pensions is accumulated by 10% deductions on the part of an employer and an employee. There is also the third component of the pension fund - voluntary deductions of an employee which are thus exempt from taxation. As a result, in Latvia, as in the developed countries of the West in general, the pension is about 70% of an average salary.

In our country the pension of 40% of an average salary is the norm.

The example with the pension system shows that other countrieseasily adapt to demographic challenges and everything works perfectly. And our government cannot adapt to anything. As well as to solve problems with pensions This is the essence of an ineffective command system that emerged in Belarus under Lukashenka.