At the time of the announcement of the promise of increasing the old-age pension ( BRP) to Rs 13,500, we had taken the stand that it was a desperate act. It was a tactic worthy of the scorched earth policy- après moi , le déluge- a last-ditch attempt of the regime knowing that the odds seemed to be stacked against it. We had argued that “the generous old-age pension (BRP) increases in the past have led to pension spending pressures further accentuating the explosive path of the projected expenditure for the BRP and putting at risk both the long-term financial sustainability of the pension system and fiscal sustainability. This had been highlighted in the latest IMF Article IV report which recommended “a gradual fiscal consolidation beginning with the next budget for FY2019/20 to enhance fiscal credibility and to put public debt on a declining path.” But this regime's abdication of its responsibility and retreat from sound macro-economic management of the country ………. “
They had ignored the numerous recommendations made over the years by different local and international institutions who had worked out different scenarios to ensure the fiscal sustainability of pensions. They had made certain proposals namely:
• Indexing the retirement age to life expectancy, accompanied by such social assistance programs as to protect the vulnerable groups and not increase poverty rates.
• Align entitlement BRP to normal retirement age (65)
• Re-examining the possibility of limiting BRP for those above a certain income threshold.
• Merging of both the Civil Service Pension scheme and the National Savings Fund with the NPF
• Increasing contribution rate to the NPF
• Improve investment and governance structure of NPF
• Measures to increase the fertility rate and the working population
Now that their populist policies are catching up with them and the pension hikes are already pinching( Social benefits represent the largest component, or 30 %, of current expenses, while employee compensation stands at around 20%), they have proposed a rapidly concocted reform of the pensions system- the Contribution Sociale Généralise(CSG).
Despite criticism from all quarters, “Padayachy persiste et signe mais évite de quantifier la pension de la CSG à partir de 2023.”
Now we understand why? Bernard Yen, actuary and director of Aon Hewitt is convinced that the CSG is not sustainable. He explains that “the CSG will bring in Rs 6 billion per year and it will have to pay Rs 12 billion per year as from 2023. Between 2021 and 2023, the CSG will have a contribution of Rs 18 billion and it will be able to pay Rs 12 billion for the first year. But afterwards it is possible that the contribution will be doubled…”
It is now clear that the National Pension Fund should not be dismantled to be replaced by a half-cooked, unworkable and unsustainable and already controversial pension reform . As proposed by many stakeholders, including some economists, “Govt should engage in a dialogue with trade unions, the private sector and civil society on the best and most practical ways of introducing pension reforms, including more contributory and targeted pensions, as well as an increase in the retirement age for entitlement.”
Otherwise , comme dans le cas de EU blacklist, le pays aura un prix fort à payer for the Payadachy’s so-called “ meilleure justice sociale”
