The International Monetary Fund (IMF) recommended that Ukraine limit the growth of pensions and social benefits over the next 3-5 years.
About this reported Oleksandr Okhrimenko, president of the Ukrainian Analytical Center.
According to Okhrimenko, the IMF is concerned that the rapid growth of pensions in Ukraine (by 10% in 2023) could lead to hyperinflation and an economic crisis. The fund proposes to limit the annual increase of pensions to 1%.
However, Okhrimenko notes that IMF experts did not take into account that pension payments in Ukraine are significantly lower than in other European countries – six times smaller.
This year, the budget deficit related to pension payments will be covered by financial aid from the USA. The Minister of Social Policy of Ukraine, Oksana Zholnovych, warns that one should not constantly count on the help of the USA in this matter.
Why the IMF recommends limiting the growth of pensions:
- Rapid growth of pensions can lead to hyperinflation and economic crisis.
- Pension expenses are already a significant burden on the budget of Ukraine.
- Pension benefits in Ukraine are significantly lower than in other European countries, so there is potential for their gradual growth in the long term.
What may be the consequences of restricting the growth of pensions:
- Decrease in the standard of living of pensioners.
- Growing social tension.
- Further reduction of domestic consumption.
What experts think:
Experts generally agree that Ukraine cannot continuously increase pensions at the rates observed in recent years. However, they call on the IMF to take into account the specifics of the Ukrainian situation and not to introduce too strict restrictions.
