- Revamped system may be unveiled within a month, Shvetsov says
- Officials face biggest budget gap since 2010 as oil slumps
The Bank of Russia is preparing a new system of pension guarantees as officials faced with the risk of running the biggest budget deficit in five years debate a range of options to steady public finances.
The central bank may announce the alternative to the current pension savings system within a month, Sergey Shvetsov, first deputy central bank governor, told reporters in New York on Wednesday. Russian non-state pension fund managers need to decide whether they want to continue on their own or consolidate to remain profitable, he said.
With a deficit forecast to widen to 3.3 percent of gross domestic product this year, officials are locked in a debate on measures to fill the budget holes that may include increased borrowing, spending cuts and higher oil taxes. The government commission for budget planning had decided to divert savings from future retirement plans in 2016 to meet budget needs, for a third year in a row, RIA Novosti reported on Wednesday, citing the head of Russia’s Pension Fund Anton Drozdov.
“The new system can’t be entirely voluntary,” Shvetsov said. “In any case there’ll be some kind of encouragement for either people or companies to set money aside for non-state pension funds. We’re trying to formulate an alternative that would be less costly for the budget but not less effective in terms of the size of the funds attracted from the population.”
Crude selling for about half its five-year average price and sanctions linked to the Ukraine conflict have pushed the world’s biggest energy exporter’s economy into its first recession since 2009. The budget deficit was 994 billion rubles ($15.9 billion) through August, or 2.1 percent of gross domestic product, according to the Finance Ministry.
Russia initially diverted money from retirement funds to revamp the industry in 2013 and then continued seizing contributions to shore up the budget as sanctions and tumbling oil prices squelched the economy. The government in May handed back to private pension managers about 530 billion rubles of employer contributions it kept in 2013.