Saturday, November 21, 2009

ZUS in trouble, again

From: NPE
ZUS is having trouble finding money to pay out its current obligations to pensioners, people on disability, and the unemployed, according to an article in the daily Rzeczpospolita.
The agency faces a giant revenue gap of some PLN 9 bln this year, the newspaper estimates.

Poland's state-run social insurance agency has been subsidized by funds from the general budget for years, but with government deficit spending set to reach record levels this year, the agency's budget gap will be harder than ever to fill.

In part, this is because the government has budgeted less money than needed to fund ZUS in order to keep its 2009 budget numbers from looking even worse. According to a statement from ZUS, its deficit "results mainly from a lower than anticipated rise in social security tax income in relation to payments made to beneficiaries."

Rises in unemployment and the number of pensioners have squeezed the agency in terms of both revenue and expenses. Moreover, pensions have risen this year, though only just enough to keep up with inflation.

The head of ZUS Zbigniew Derdziuk denies the problems are so serious. He estimates that the agency's deficit will only reach PLN 5.5. bln and that it can secure sufficient bank financing to cover the PLN 2.3 bln it will need to borrow this year. Last week, the government announced a plan to cut the amount of money going to the private Open Retirement Funds from 7.3 per cent to 3 per cent of salaries in an effort to help ZUS shore up its finances. Economists, pension fund managers, and the public have all lined up against the idea.

According to a recent poll by IQS, 66 percent of Poles are strongly against the new plan, while only 14 percent are in favour. Many economists have argued that the proposal is just a quick fix to shore up public finances, and will not solve longer-term problems facing the retirement system, which are rooted in declining demographics and a retirement age that remains among Europe's lowest in spite of recent changes that have reduced early retirements.

Bogus?aw Grabowski, a former member of the Monetary Policy Council member and current head of the TFI Skarbiec fund, sees raising taxes as less harmful than the government's new plan, which he said was aimed at achieving "short-term political goals." "The collapse of the retirement system is worse than a breakdown in public finances because it is long term," he told TVN-24.

Although the government has not released data on the finances of the National Health Fund, the state-run healthcare system also appears to be facing a deficit this year. Yet unlike ZUS, the fund has sufficient reserves to meet its current needs, according to Rzeczpospolita.