Russia may need to dip into its $87 billion National Wellbeing Fund (RUWFUSD) to help cover a pension deficit and must finish a delayed overhaul of the retirement system, President Vladimir Putin said.
The government must determine the extent to which the fund can be used to cover the shortfall based on its pension revamp while ensuring a “long-term balance,” Putin said today in the Kremlin, during his annual budget address. The new system should be simple to use for all participants, he said.
“The formula should be fair, stable, transparent, and above all, understandable for the worker and the employer,” Putin said. “You’ve almost reached a solution to this problem, and the work on it must be completed.”
Russia is trying to close a gap in pension obligations after increases to help protect retirees during the global financial crisis in 2008 and 2009. Finance Minister Anton Siluanov said last month that balancing the budget by 2015 was no longer feasible because of the worsening economic outlook.
The ruble appreciated after Putin’s remarks on speculation Russia would have to sell foreign-currency assets held in the Wellbeing Fund, one of two funds the state uses to safeguard windfall oil revenue, to buy rubles and pay pensions. It rose 0.9 percent to 36.8934 against the dollar-euro basket as of 3:47 p.m. in Moscow.
The government last year transferred 1 trillion rubles ($31 billion) from the federal budget to cover the state Pension Fund’s deficit. The gap will contract to 942.8 billion rubles in 2013, according to the fund’s estimate.
Putin also ordered his ministers not to rely on higher taxes to make up the shortfall. The overhaul, under which workers with longer employment histories and higher wages would receive greater pensions, musn’t increase the burden on entrepreneurs or hinder economic growth, Putin said.
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