Ukraine government to make one-off payments to pensioners

Ukrainian President Petro Poroshenko announced on Feb.
25 that his government will make a one-off payment of UAH 2,410 (USD 89) to
pensioners receiving the minimum state pension. The payments are to compensate
for missed inflation adjustments in 2014-2015 owing to the economic decline at
that time, he told a meeting of the State Pension Fund the same day, as
reported by the Interfax-Ukraine news agency. Eligible pensioners will receive
this payment in two tranches of UAH 1,205 in March and April. Depending on work
tenure, minimum pensions range from UAH 1,497 to UAH 1,669.

The payments were made possible by swelling revenues
gained from a temporary amnesty on vehicles with EU license plates, which had
been acquired to avoid what were widely viewed as excessive duties, taxes and
fees to register foreign-born vehicles. Parliament voted in November to cut in
half one of the taxes to encourage these vehicle owners to register their
automobiles between Nov. 25 and Feb. 24. As a result, the government drew UAH
13.5 bln in revenue, of which UAH 7.6 bln was transferred to the State Pension
Fund, according to the State Fiscal Service.

In the related news, Interfax-Ukraine news agency
reported that starting March 1, state pensions will increase UAH 255 per month,
on average, as part of annual adjustments for inflation provided by the 2017 pension reform.

Evgeniya Akhtyrko: The one-off
payments are intended to boost support for Poroshenko’s re-election campaign
among elderly voters, who are the most reliable. That was likely the plan
behind the license plate amnesty from the very start. From an economic
viewpoint, this one-time payment is not likely to create additional pressure on
the budget considering that only UAH 1 bln was planned from this initiative.

If not for election pressures, the rational way to use
this extra revenue for pensions would have been to gradually fund all the
year’s planned payments. In particular, this would lower planned state budget
transfers to the pension fund. This year’s pension fund spending is earmarked
at UAH 398 bln, out of which UAH 167 bln is a planned financing gap that will
be covered by budget transfers.