SOFIA (Bulgaria), October 26 (SeeNews) – The International Monetary Fund on Tuesday urged Bulgaria to reform its pension system to avert a rise in the deficit in the system above its current levels.
"Our assessment is that the structure of this system is well designed and that measures and reforms should improve it, not reverse it," Emanuele Baldacci, the head of the IMF Technical Assistance Mission on pension reform which paid a visit to Bulgaria, told a news conference.
"This is why that we suggest that the implementation of the 2000 reform should start as quickly as possible," he added.
Under the reform, launched 10 years ago, vocational pension funds were created in order to pay early pensions for those with riskier professions like miners. The payment of such pensions was scheduled to start next year but the the government in Sofia recently announced plans to start redirecting money from the funds into the state pension system, saying it wanted to pay bigger pensions to the contributors to the funds.
According to Baldacci, a provisional sharing between public and private pension funds would help stabilise the pension system which currently is quite imbalanced.
He said that revenues and expenditures could be balanced through raising both the retirement age and the pension contributions in the long run.
Baldacci also said that the current formula used to calculate pensions should be improved in the medium terms, so that a clear link is established between how much people pay to contribute and how much they get afterwards.
Such measures are expected to cut the deficit in the pension system by 1.0% of the gross domestic product (GDP) and will eliminate the need of transfers of funds from the state budget to the pension reform, he said.
"However, given the current imbalances, these measures will not be sufficient to cover the gap in the pension system and, obviously, large pension system imbalance would not be helpful for the overall budge balance," Baldacci added.
Earlier this month the government announced it will increase pension contributions by 1.8 percentage points as of January 1, 2011.
Bulgaria plans to bring down its budget deficit to 2.5% of the GDP next year from 4.6% of GDP projected for 2010.