Fiscal sustainability, the alert point for Minhacienda with the pension

This week the Ministry of Finance and Public Credit presented several observations on the pension reform project that is being prepared for debates in the House of Representatives, in which it requested that it be carefully analyzed. the fiscal impact that this initiative will have, to guarantee its sustainability in the future.

During the public hearing held in the Seventh Commission of the Chamber, the General Director of Macroeconomic Policy of the Ministry of Finance and Public Credit, Daniel Osorio, presented five considerations that from the portfolio he represents, They maintain that we must debate in depth, starting with the gender balance.

In this sense, he pointed out that it is necessary to maintain a balance between fiscal sustainability and benefit benefits for women in the pension reform, emphasizing that the reduction of the number of minimum contribution weeks for women to 850 has a significant cost. which must be carefully evaluated.

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“This reform has made great progress in the gender balance, in correcting historical distortions that have affected women compared to men, not only in the labor market, but also in the pension system. But it is necessary to strive for an adequate balance between the sustainability of public finances and benefit benefits for women. You have to be careful there,” said Osorio.

Pension Reform Debate in Congress

Courtesy of Mintrabajo and Senate

Secondly, the delegate from the Ministry of Finance to present this report criticized the Senate’s decision to allow pension fund administrators (AFP) to charge a commission of up to 0.7% on the balance saved, describing this decision as as excessive.

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“Because it would be in addition to those that already exist by flow, that the reform would eventually eliminate them in accordance with what is established there, this commission is created on the balance that already exists and also the possibility of regulating performance commissions,” he said.

Pension reform

Sergio Acero Yate / Portfolio

At this point he highlighted that “we call for this to be part of the debate, to discuss whether the possibility of the Government being the one to finance, the one to regulate balance commissions and performance commissions, as was our idea, should be maintained. original, in line with the best international practice.”

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The Director of Macroeconomic Policy of the Minhacienda He also spoke of the need to carefully review articles that include special regimes for ethnic minorities, such as peasants, due to the potential fiscal costs and the possibility of abuse of the system.

Minister of Labor, Gloria Inés Ramírez

Courtesy – Ministry of Labor

“The Senate added articles that include what could in effect be considered a parallel regime for ethnic minorities, and there we have to be careful, especially in terms of the fiscal cost and especially in terms of the Government’s ability to make this happen.” complies and that there are not somehow sneaked into this regime,” he explained.

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Daniel Osorio took advantage of his intervention to touch on the issue that it was decided that the Banco de la República manages the savings fund of the contributory pillar, instead of Colpensiones, insisting in this part on the need to strengthen the protection of this fund and the independence of the Bank of the Republic, shielding it against political risks and allowing you to manage the fund without compromising your independence.

Bank of the Republic.

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“There has been a lot of talk about this, how managing a fund that in principle is not part of its traditional theoretical function can affect the independence of the Bank of the Republic. Shields have been established, the Senate did a good job, but I believe that more progress can also be made there,” he added.

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Finally, the Minhacienda official warns that The system of generational accounts, which compartmentalizes funds by generation, can increase fiscal expenditures in the short and medium term.

Colombian pesos

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In this sense, he closed by saying that although this system has benefits, it could also compromise fiscal sustainability and compliance with the fiscal rule in the short term, which requires a careful reassessment during the debate in the House.

In recent days, three meetings have been held between delegates from the Ministry of Labor, headed by Minister Gloria Inés Ramírez, and the members of the Seventh Commission of the Chamber in order to discuss the articles of this initiative, which would be filed no later than next Friday.