Kristalina Georgieva Secures Second Term as IMF Chief
Bulgaria's Kristalina Georgieva has been appointed for a second term at the helm of the International Monetary Fund (IMF)
Bulgaria's government is expected to announce on Friday whether it will proceed with plans to transfer the pension accounts in nine private funds with total assets of about BGN 500 M to the state in a bid to solve its fiscal woes.
The decision was initially due on Wednesday, but was delayed due to the additional information that employers demanded from Finance Minister Simeon Djankov.
The proposal has proved highly controversial in Bulgaria and critics, including analysts and business groups, fear that if the bill passes, the mandatory general pension funds, whose assets are worth BGN 2.5 B, will be next in line. They say the move will undermine fledgling financial markets and hit investor confidence in the recession-hit country.
The International Monetary Fund (IMF) has also warned the government against changing the pension system, saying that redirecting private funds to the state will not close the gap in the social security system.
Representatives on the nine private professional retirement funds in Bulgaria met Tuesday with Prime Minister Boyko Borisov to present their position on why they have been protesting the so vigorously the controversial plan for the nationalization of employee's early retirement personal accounts.
The planned measure, which is included in draft amendments of the Social Security Code, provide for seizing all early retirement accounts of people with jobs with hard working conditions (categorized as jobs in "first" and "second category"). Those are supposed to be consolidated in a new solidarity fund, which should be a subdivision of the National Social Security Institute (NOI).
According to Labor Minister Mladenov and NOI head Mitreva, the move will help provide higher and more just pensions for those person who have the right of early retirement.
The private funds, however, have refuted these allegations, saying that they provided the Prime Minister with data about their profitability, and that all of their transactions are constantly monitored by the Financial Supervision Commission.
"We feel confident because after the information that we provided to the government today, there is no way for the government to take a decision based on misleading data," said Daniela Petkova, head of the Doverie retirement funds.
Nikola Abadzhiev, head of the Association of Pension Funds in Bulgaria, also expressed optimism that Borisov will not decision in favor of nationalizing the early retirement accounts.
The representatives of the private funds disagreed with the statement of the Labor Minister that all monthly pensions they provide to early retirees are BGN 50.
The funds have pointed out that Monday's report of the IMF on Bulgaria's pension system in fact backed their position, and will probably also influence the decision of the Prime Minister.
Abadzhiev said the funds have alerted the IMF and the US Agency for International Development, who are among the initiators of the retirement reform in Bulgaria, for the intentions of the government.
In the meantime, the Supervisory Council of NOI adopted the proposed amendments to the Social Security Code.
The draft changes will be discussed on Wednesday by the National Council for Tripartite Cooperation – including the government, the business sector, and the syndicates, and will then be taken to the weekly Cabinet meeting, where it will be adopted. This is when it will become clear if Borisov has decided in favor of nationalizing the early retirement accounts.
A few over 100 000 people in Bulgaria have jobs categorized as first or second category.
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