By Radu-Sorin Marinas
BUCHAREST (Reuters) – Romania’s Labour Ministry has drafted a plan to more than double state pensions over the next four years for the country’s 5.2 million retirees, Minister Olguta Vasilescu said on Friday, a proposal critics deemed unrealistic.
Vasilescu’s draft showed pension-related spending in the social security budget would rise to 140 billion lei (£26.9 billion) over four years, from 61 billion lei.
She told reporters the cash amount required to meet the plan would be partly covered by a sharp 70 percent increase in revenues from mandatory social contributions which were forecast to reach 100 billion lei by 2022.
“The explanation is simple: we estimate an increase in social security budget which is generated by a hike in wages, an increase in the number of employees and better collection that reflects a return of the tax burden,” Vasilescu said.
Official statistics put the current monthly average state pension in Romania at 1,100 lei.
The aim of the plan, which will be put out for public debate, is to iron out discrepancies, regardless of the year of retirement or previous employment, that have built up over the years between beneficiaries of the pension system.
However, critics of the plan, including the centrist opposition and some leading economists, said the proposed spending levels had been set unsustainably high.
“I wonder how can they support an average increase in pensions spending of about 25 percent a year as they propose … doing this for four years,” said Raiffeisen Bank Chief Economist in Bucharest Ionut Dumitru.
“This is way too much, so the plan looks completely unsustainable.”
Last week, the government revised its 2018 budget but stuck to its deficit target, with higher than expected revenues due to offset greater allocations for health, pensions and education.
The Social Democrat government is targeting a consolidated budget deficit of just under 3 percent of GDP – the European Union’s ceiling this year. Economists polled by Reuters expect it to overshoot it, at 3.1 percent of GDP.
(Editing by Alison Williams)