ECONOMY

Turk welfare reform seen to pass later this month

ANKARA – Turkey’s parliament is expected to pass a long-delayed social security reform this month and parts of it can start to be implemented in May, the deputy president of the Social Security Institution told Reuters yesterday. Passage of the reforms is a condition set by the International Monetary Fund (IMF) before it approves a $1.3 billion loan tranche under Turkey’s $10 billion standby deal. Tahsin Guney said in an interview the country’s social security deficit is estimated to rise to 26.9 billion lira ($22.41 billion) for 2008 if the reform is passed this year, versus 29.8 billion lira if the existing system remains. The deficit was more than 25.82 billion lira in 2007, more than double the government target, causing the budget deficit to widen to 2 percent of gross national product from one percent the previous year. «The planning and budget commission passed 18 of more than 70 articles. We can expect parliament to pass the reform in the second half of March,» Guney said. Guney said Turkey’s population was aging fast and the ratio of people above 65 would reach 7 percent in 2012 and 14 percent in 2037. «We need to be prepared for demographic changes. The young population that we are proud of and good days are close to an end,» he said. Now 1.9 workers are financing one pensioner, while this could have been 6.2 with the current young population if the country did not have an unregistered economy half the size of the formal economy and an early retirement system, he said. Unification of three separate social security institutions under the administrative part of the reform in 2006 has created a more efficient and less costly system, he said. The Constitutional Court rejected the parts of reform regulating retirement. The current retirement ages, at 44 for women and 48 for men, are not sustainable and the existing system encourages early retirement. Critics of the new social security plan say it sets the threshold for blue-collar employees to reach retirement too high at 9,000 working days. The current level is 7,000 working days. Some of those employees may never retire because they lack permanent jobs in sectors such as construction. «A minimum wage-earner who is paid 480 lira now receives a 560 lira pension if they retire. We tell people to retire earlier and have more money,» he said. But Guney said health expenditure should be expected to rise with the introduction of universal healthcare for all Turks and foreigners working in the country. The health expenditure is projected to rise to above 3 percent in 2011, from 2.1 percent of gross domestic product now, he said.