While reforms to reduce spending on civil service pensions and salaries have not been completed, the International Monetary Fund (IMF) insists that the government should postpone “as much as possible” the reversal of pay cuts and the end of the Contribution Extraordinary Solidarity (CES). The board is left in the report on the development of the country after the departure of troika , released on Friday, in which the institution is concerned shows the risk of breaches of the deficit targets already in 2015.
The Fund points out that in 2016, and according to a ruling of the Constitutional Court (TC), cuts in salaries of civil servants will disappear and the ESC (this year only affect pensions above 4611 euros) will be reduced to so significant. Against this background, the institution considers that the Portuguese authorities must be able to contain expenditure on both fronts.
“Despite legal challenges and growing political pressure because of the elections next year [2015], additional measures are needed to contain expenditure on salaries and pensions (…) to achieving the deficit targets, “recommend the technicians who were in Portugal at the end of October.
A few lines later, the IMF takes these recommendations. For pensions means that it takes “additional efforts” to improve the fairness and system maintainability. And warns:. A “comprehensive reform of the civil servants’ pension scheme” is necessary, paid by the General Pension Fund whose beneficiaries “receive disproportionately higher pensions than in the general Social Security”
This reform of the system should provide, among other measures, the indexation rule of pensions to economic and demographic indicators, as was once proposed by the working group for the reform of pension systems that the government, however, postponed.
Similarly, the IMF calls for reform “more ambitious” in remuneration and public sector careers to ensure “the sustainability of the payroll” and a system of recognition of merit “able to retain and attract” workers most qualified for state agencies.
The measures that may be taken in these areas depend greatly on the results of parliamentary elections. The PS has said he intends to comply with the judgment of the TC, who accepted pay cuts in 2015, but warned that in the following years if it is not before the same emergency situation. The prime minister, for his part, admitted resume its proposal for a reversal of the 20% cut per year by 2019.
With regard to the reform of pension systems, everything is open, then Pedro Passos Coelho has delayed structural reform until after the election.
IMF says there is scope for savings
While structural reforms are not enough, the IMF believes that in the short term, there is scope to go further rationalization of public expenditure. And gives as examples further reductions in public employment through friendly termination and renewal (the former special mobility) in areas where there is excess employment and “more ambitious savings” by reducing or eliminating the supplements paid to civil servants. Adds that there may be an additional effort in the area of resource condition for access to non-contributory benefits.
In the case of friendly terminations, the Government has an ongoing program for employees of local authorities. After a halt of almost three months, streamlining the supplements is currently in the hands of the President having a guiding diploma on the table for promulgation. However, the Government has already said he did not expect significant savings the creation of the single table and rationalization of these supplements that cost 700 million annually.
The insistence of the IMF in seeking new fiscal consolidation measures is also explained by numbers. The Fund provides that the public deficit in Portugal is forecast to remain this year at 3.4% instead of 2.7% registered by the government in the budget. And projects that, only in 2018, the country will achieve a deficit below 3%, from the excessive deficit procedure brought against him by the European authorities.
The report explains that the difference between its budget estimates and the Government are mainly related to the fact that the Fund will not be so optimistic about the impact of the economic recovery in the public accounts and the results of the fight against tax fraud.
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