BUCHAREST (Reuters) - Romania’s government has approved a plan to more than double state pensions over the next four years for the country’s 5.2 million retirees, a move that critics say will put heavy strain on public finances in the long run.
Under the plan, pension-related spending in the social security budget would rise steeply to 142 billion lei ($35.12 billion) by 2022, from about 62 billion set aside for this year.
“We won’t enforce any cuts in exchange, nor introduce new taxes to support this plan, GDP will expand every year over the next four years,” Labour Minister Olguta Vasilescu told reporters on Wednesday. The budgetary impact will be 8.4 billion lei in 2019.
The aim of the overhaul is to iron out discrepancies that have built up over the years between various beneficiaries of the state pension system, regardless of the year of retirement or previous employment.
The ministry said previously that the cash required to meet the plan would be partly covered by a 70 percent increase in revenues from mandatory social contributions.
The government, which has a comfortable majority in parliament, will now submit the plan to legislators for debate and approval.
Vasilescu said that after 2022 all state pensions would be adjusted in line with consumer price inflation plus 50 percent of the real growth of the average wage in the economy.
Official statistics put the current monthly average state pension in Romania at about 1,100 lei.
The Social Democrat government is targeting a consolidated budget deficit of just under 3 percent of GDP - the European Union’s ceiling - this year. Economists polled by Reuters expect an overshoot to 3.1 percent of GDP.
Editing by Kirsten Donovan