Pensions: lower guarantees for the sake of stability

Category status:
April 22, 2016 18:37

Presidential Decree No 389 of September 3rd, 2013 envisages that as of January 1st, 2014, the right to a retirement pension by age or seniority will be granted only if Social Security Fund payments have been made for at least 10 years. Currently the limit is 5 years.

The state does not dare to carry out a full-scale pension reform, but negative demographic trends and decreased pension fund revenues are forcing the authorities to reduce social guarantees for the retired. In the short-term, the said amendments will help the state to maintain the level of pension payments acceptable for the majority at the cost of marginalized groups, which will be excluded from the state support programmes.

The Belarusian authorities’ actions imply that it has become more challenging to fill the pension fund. According to the World Bank forecast, Belarus’ pension fund deficit may occur as early as 2014 due to the aging population. The Belarusian authorities have made similar assessments in the 2011 – 2015 National Demographic Security Programme. However, with 2015 being the year of presidential elections, the country’s leadership cannot afford a pension fund deficit or unpopular measures, since pensioners make up the core electorate of the incumbent president.

The authorities cannot increase the size of the pension fund contributions; as the current size of the contributions is quite high, this would be an unpopular measure. In Belarus, the amount of social tax is higher than in other CIS countries, making up 34% of the payroll. In Russia, social tax rate is circa 26 %, and in Kazakhstan - 11%.

Fairly large social groups will be affected by lower standards of social guarantees. In July 2013 Prime Minister Myasnikovich said that circa 445,000 working-age people in Belarus “do not work anywhere, do not contribute to the economic development and at the same time enjoy social benefits”. Potentially, with these amendments the government will try to encourage the population to take up legal employment, which in turn will result in increased payments to the Social Security Fund.

Hidden unemployment and ‘shadow’ economy employment issues are periodically addressed by various officials, including Alexander Lukashenko. In July 2013, Prime Minister Myasnikovich proposed to solve this problem by introducing a tax on the unemployed.

In 2013 Belarus’ social state has been consistently shrinking. Economy Minister Snopkov said that in the near future housing tariffs would be increased to 15% of the average consumer basket (currently 7-8% on average). De facto, since August 2013 the preferential housing loans programme has been suspended (the programme had been malfunctioning since the 2011 crisis). In education, fee-based services are expanding. Extra-curricular activities at secondary schools have been fee-based since February 2013. In addition, Economy Minister Nikolai Snopkov also said that in 2014 the government planned to stop regulating bread and prices of other products.

Most recently, Lukashenko proposed to introduce an exit fee of USD 100 for those who travel abroad. This proposal is unlikely to become a reality, but it drives the population’s attention from significantly reduced social benefits.

Similar articles

Belarusian and Ukrainian Defence Ministries entangle in confrontation spiral
October 02, 2017 11:57
Фото: RFRM

Over the past year, military-political relations between Minsk and Kyiv have become complicated. Due to their high inertia and peculiarities, this downward trend would be extremely difficult to overcome.

The root cause of the crisis is the absence of a common political agenda in the Belarusian-Ukrainian relations. Minsk is looking for a market for Belarusian exports in Ukraine and offers its services as a negotiation platform for the settlement of the Russo-Ukrainian war, thereby hoping to avoid political issues in the dialogue with Kiev. Meanwhile, Ukraine is hoping for political support from Minsk in the confrontation with Moscow. In addition, Ukraine’s integration with NATO presupposes her common position with the Alliance in relation to Belarus. The NATO leadership regards the Belarusian Armed Forces as an integral part of the Russian military machine in the western strategic front (the Baltic states and Poland). In addition, the ongoing military reform in Ukraine envisages a reduction in the number of generals and the domestic political struggle makes some Ukrainian top military leaders targets in politically motivated attacks.

Hence, the criticism of Belarus coming from Ukrainian military leadership is dictated primarily by internal and external political considerations, as well as by the need to protect the interests of generals, and only then by facts.

For instance, initially, the Ukrainian military leadership made statements about 100,000 Russian servicemen allegedly taking part in the Russo-Belarusian military drill West-2017. Then the exercises were labelled quazi-open and military observers from Ukraine refused to provide their assessment, which caused a negative reaction in Minsk. Further, without citing specific facts, it was stated that Russia was building up its military presence in Belarus.

Apparently, the Belarusian and Ukrainian Defence Ministries have entangled in a confrontational spiral (on the level of rhetoric). Moreover, only a small part of the overly hidden process has been disclosed. That said, third states are very likely to take advantage of the situation (or have already done so). This is not only about Russia.

The Belarusian Defence Ministry officials are restrained in assessing their Ukrainian counterparts. However, such a restraint is not enough. Current military-political relations between Belarus and Ukraine are unlikely to stabilise without the intervention of both presidents.