New pension scheme, IMF recommendation - "Bonus is a temporary measure, projections are dangerous for the budget"
The International Monetary Fund suggests that the Albanian government undertake a genuine reform of the pension scheme. Referring to the latest report of this institution, pension reforms remain a top priority, even though the pension scheme deficit is currently at a historically low level, while the year-end bonus is a temporary measure.
The report notes that with pension liabilities exceeding contributions, the pension system in Albania is already facing a deficit and spending pressures are expected to increase in line with projected demographic trends.
"The old-age dependency ratio in Albania, which is currently 26 percent, is expected to triple by 2070 to 83 percent, a level much higher than in comparable countries (50-60 percent). The increase in pension costs is supported by United Nations projections on the country's expected long-term demographic performance and the weight of the elderly population," the report states.
However, the IMF projects that contributions are assumed to grow along with GDP per worker. The simulations are based on a simple set of assumptions related to each reform measure including wage reform as well as the impact of emigration on the potential number of beneficiaries in the long run (e.g. the interaction between emigration intensification and the number of long-term beneficiaries).
According to the IMF, although public debt is currently declining, Albania continues to face high net emigration, an anemic birth rate, and an aging population. Beyond demographics, this means higher spending on the pension scheme and an impact on public debt in the long term.
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