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Lukashenka Has Long Been Warned About Problems With Pensions, Economist Says

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Lukashenka Has Long Been Warned About Problems With Pensions, Economist Says
Cartoon: cartoon.kulichki.com

The authorities have taken a different path.

Recently, Lukashenka had to admit that the deficit of the Social Security Fund (SSF) had increased by 9 times in six years. After that, the ruler ordered officials to develop a new system of contributions to the Social Security Fund.

At the same time, experts note that the Belarusian authorities are already saving on pensions for many categories of the population, not including their activities in the pension insurance record.

Thus, Minister of Labour and Social Security Iryna Kastevich has recently refused to include compulsory military service in the pension record, despite the tightening of the conscription rules in the new law "on deferments".

What will happen to the pensions of Belarusians? Economist Leanid Zlotnikau answers questions of Charter97.org.

- What has initiated such a huge gap in the Social Security Fund? After all, everybody makes contributions, even individual entrepreneurs working at zero or at a loss...

- There are a number of factors here. The key one is the change in the structure of the population. The number of employed is decreasing compared to the number of pensioners. This process is common not only for Belarus but also for many European countries.

A simple reproduction of the population needs every woman to give birth to a little more than 2 children. But the birth rate in Europe and Belarus now fluctuates at the level of 1.3-1.5 children per family. The process with a declining number of employees and a growing number of pensioners has been ongoing for two decades.

Lukashenka was warned about this a long time ago. The Minister of Labour and other civil servants responsible for social security in Belarus informed him. But Lukashenka did not make any decisions.

When the deficit of the pension fund started after 2014, they had to extend the working period - the retirement age was increased.

Time passed and it became clear that the retirement age increase by two years was not enough. The situation will only worsen in the future.

- But Europian countries have somehow managed to cope with repercussions of the natural ageing of the population. What is the secret?

- Indeed, our European neighbours have the same demographic problems - Latvia, Lithuania and so on. But they decided to take a different path.

They are carrying out a pension reform, which includes several components of the pension: one part - social, the second depends on the length of work experience, the third - the savings of employees themselves. That is, a part of the funded pension is also introduced. Latvia has been the most successful in this regard.

Belarus did not solve these problems for a long time and then made the decision which was relevant for 4-5 years.

- You named the demographic factor. What did else affect the poor state of the Belarusian SSF?

- The second factor is the economic situation deterioration.

We know that loss-making state-owned enterprises are supported. It requires huge resources - about $2 billion according to last year's data. And these subsidies are growing. Instead of reforms, ineffective production is preserved. It causes a shortage of funds to support the social system as a whole, not only pensioners.

At that, the shortage of funds is steadily growing despite the growth of foreign debts, which expectedly increase by a billion dollars a year. The system is not reformed, and its major problems are not being solved properly. Including the problem of lack of funds for the pension fund.

The retirement age increase is only half-measures that do not work if this economically inefficient system is preserved.

- How would you comment on Kastsevich's refusal to include compulsory military service in the insurance record? After all, a person does not serve at will, especially after the tightening of the law on conscription.

- Indeed, here the state is to blame for the loss of an insurance record. At that, the state draws the pension for officers according to other principles than for civil ones.

And guys who serve in the army, do not belong to either officers or civilians. I consider that the compulsory military service should be as equal as that of officers. Both soldiers and officers serve in the army.

But, unfortunately, we do not make such decisions.

And in general, as soon as a professional army and contract enlisted service with a good salary is introduced, this issue will not arise anymore.

The Belarusian authorities are now trying to extinguish the fire, which could have been avoided a long time ago. These reforms should have been carried out, as in Latvia, back in the late 1990s. But Lukashenka turned a blind eye to it and brought everything to the point when no good solutions are affordable.

- Apart from soldiers, there are several other categories in Belarus, whose work is not included in the pension record. These are parents on maternity leave, people who take care of sick relatives, students at universities. How can one solve the problem of people, who are now trapped by the "insurance record"?

- There are different ways. It can be achieved through high social benefits, compensation and a social capital system. Finally, through the restoration of the retirement age to these people.

But again, we do not solve these issues. And the government failed to solve them in time and now it is hard to fix it.

The paradox is that everything depends on the economy. A solution for these categories may be found, but the time will come and everyone will suffer problems again. The Belarusian economy provides very little for livelihood. It is slowly dying out, becoming completely ineffective compared to other countries.

If the same model of the economy remains, no solution to pensioners' problems will be found. The solution is not to divide the decaying pie. It is about making this pie bigger so that GDP could rise.

As an economist, I know that the economy must grow, and then all the issue can be solved. I also make the introduction of basic unconditional income even for those who do not work, as it is done under experiments in Finland.

People around the world start working less now, and the working day is getting shorter. Human labour is being replaced by robots. In 4-5 years' time, there will be very few workers in the light industry, for example. And now this industry requires for women work very hard.

If you have a broader look of the problem, you'll see that quite different approaches to solving Belarusian problems are needed. But the authorities keep extinguishing a particular problem today. Well, the lights are on, but nobody's home. Populists who do not want to study even the alphabet of the economy and do not understand how it works have gathered in power.

Hence all problems arise. The authorities do not understand that the task is not to divide, but to create.

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