Ukraine to submit pension reform plan for IMF review

Ukraine is currently preparing its pension reform plan for IMF review within the next few weeks, Finance Minister Alexander Danylyuk said on April 12, as reported by the UNIAN news agency. Recall, the IMF requested the Ukrainian parliament to approve pension reform legislation by the end of April in its revised memorandum published on April 4, the day after it approved its USD 1.0 loan tranche. The memorandum called for a more flexible pension system “with wider range of retirement ages”. It also alled for incentives provided to those who work longer and retire later.

Alexander Paraschiy: Few political issues are as sensitive as pension reform and we’re already seeing politicians taking cover under populism. Raising the minimum pension age is out of the question but some politicians might muster enough courage to promote the IMF’s position of raising the “years-of-service” requirement, as well as create incentives to retire later.

The Cabinet reportedly plans to increase pensions (they call it “modernize” pensions), pay full pensions to working pensioners and to launch voluntary pension mechanisms (in addition to the current pay-as-you-go system).

The Finance Ministry will propose compensation mechanisms to make increasing the years-of-service requirement politically possible. If the final proposal doesn’t raise the pension age and offers a bonus package, it has good chances to gain parliamentary approval.