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UPDATE 2-Ukraine parliament approves heavily amended pension reform
October 3, 2017 / 3:24 PM / 2 months ago

UPDATE 2-Ukraine parliament approves heavily amended pension reform

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By Pavel Polityuk and Alessandra Prentice

KIEV, Oct 3 (Reuters) - The Ukrainian parliament approved pension reforms on Tuesday aimed at easing pressure from a pensions deficit of more than $5 billion while also raising the minimum pension.

Passing laws to put the buckling pension system on a sustainable footing is a key requirement for the next loan tranche from the International Monetary Fund.

But last week a senior World Bank official said the bank and the IMF were concerned about the hundreds of amendments that have been added to the draft pensions legislation since July, many submitted by populist factions in parliament.

The amended bill was backed by 288 lawmakers, comfortably over the 226 required to pass.

“We’re taking a historic decision to establish a fair pension system,” Prime Minister Volodymyr Groysman said before the vote.

It was not immediately clear which of the law’s amendments may conflict with Ukraine’s commitments under its $17.5 billion IMF programme.

Ukraine, whose 12 million pensioners almost equal the number of people with jobs, spends more on pensions as a percentage of gross domestic product than almost any other country.

Backed by the IMF, the government has sought to relieve pressure on the deficit by proposing stricter contribution requirements, while raising the minimum pay-out to pensioners, which currently amounts to little more than $2 per day.

But some aspects of the reform faced stiff opposition from some lawmakers, who said savings could be found without tighter rules on the retirement age. The IMF says those rules are needed to ensure the sustainability of the pension system.

Ukraine must enact viable pension reform, improve the privatisation process and tangibly reduce corruption to receive the next tranche of IMF loans.

Gas prices and the budget must also be in line with the programme, which has been repeatedly delayed by stop-start reform efforts since it was agreed in 2015.

Ukraine has received $8.4 billion so far from the Fund, helping it recover from a two-year recession following the 2014 annexation of Crimea by Russia and the outbreak of a Russian-backed insurgency in its industrial east.

editing by Matthias Williams, Larry King

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