O. Ustenko: “Irreversible processes in the pension system has already started”

О. Устенко: «Необратимые процессы в пенсионной системе уже начались»

In Ukraine, recorded late payment of pensions. The ГолосUA decided to find out the causes of this phenomenon from the Executive Director of the International Fund blazer Oleg Ustenko. We also asked how to resolve the situation with the Pension Fund deficit.

– Oleg, why Ukraine has begun delays the payment of pensions?

– Problems in the pension system are connected with the unstable economic situation and low GDP growth, poor business climate and the lowest GDP per capita in Europe. In parallel, we see the intensification of migration processes of Ukraine. Talk about the fact that pensions had not come on time due to technical problems, not quite true. It’s something we face quite often. And it’s not deferred the issue that will continue to grow through the years, two, three. We are talking about months. The PFC deficit will not shrink and will only grow. One traveling abroad of people of working age makes it impossible to maintain one pensioner. That is, one migrant left, so retired shall be excluded from the budget of the pension Fund. There is a one to one ratio. Given that migration will intensify, the problems of the pension Fund will not be resolved just like that. We can say that irreversible processes in the pension system has already started.

– How can I resolve the situation with the Pension Fund deficit?

– The only change in the system of economic policies can provide relatively stable operation of the Pension Fund. If you save a policy that is now being implemented in the country, the pension system will continue to collapse. In the end, will need to go to the Georgian pension system, when all pensioners receive the minimum pension. I mean, we’re talking about egalitarianism. But even this system can not long time to function, as it will deteriorate demographics. In particular, if the economy is weak, migration is high and the birth rate is low, the system may even fall apart, and will need to move to a model that is valid in the countries of Central Asia, where caring for seniors is a task of their children. The model for Ukraine from the point of view of mentality is not normal. In order to save the pension for the people to raise the retirement age. Don’t think this idea is correct, but the only thing that can temporarily change the situation. To avoid collapse of the pension system need to boost the economy of the country. It will automatically stop migration. Stories about the need to raise Unified social tax (Ust) to its previous level meaningless. If this is done, the part of the labour market will drop even more “shadow”.

– What are your forecasts for inflation and the devaluation of the hryvnia?

In recent years, the hryvnia started to lose its positions. It devalues because of the many unresolved issues. The country needs a new economic course. There are about 18 billion dollars in foreign reserves, of which only 7 billion of its own money, and the rest of the “untouchables”. Loans no one lends or borrows, but very expensive. It would not be bad to take money from the IMF at 3% per annum, not to enter foreign markets. Ukraine is not a country that is preferred by investors or lenders. Now if our country wants to access foreign markets borrowing capital, it would be one of the largest in interest rates in the world – from 9% per annum. It is connected with the fact that Ukraine has the lowest credit ratings among European countries. This so-called junk ratings. You can write off part of the problems on the war in the Donbass, but that doesn’t explain the whole situation. This means that the problems of the budget deficit will grow, and the hryvnia to devalue.

What will happen with the Ukrainian economy?

-She can’t go out on the old model of growth. Mean export and raw material orientation, as it requires investment. To investment must be of good investment climate. Investors just don’t believe Ukraine, as they see a serious flow of capital in the so-called “safe Harbor”. For many, this quiet haven, the USA. Resource investment in developing markets is getting smaller. All this is happening against the background of possible global shocks. Geo-economic centers don’t exist in balance. Accordingly, a marker of the start of the economic turmoil may be the action of the President of the United States Donald trump’s or China’s problems.

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