1999/12/13 23:27 CRISIS IN THE PAYMENT OF PENSIONS AND WAGES
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    Copyright: The following text is for personal information only. Any professional use or publication in written or electronic form is subject to an agreement with AIM, 17 rue Rebeval, F-75019 Paris, France

    MON, 13 DEC 1999 23:27:20 GMT

    CRISIS IN THE PAYMENT OF PENSIONS AND WAGES

    AIM Sofia, December 9, 1999

    Who is rocking the "currency boat" which has maintained the stability of the Bulgarian financial system for the last three years? If you ask Prime Minister Ivan Kostov this he will not tell you that the reasons lie in the non-functioning and non-producing economy. One of the answers he has been giving these last week weeks is that the National Insurance Institute (NOI) has been undermining the financial discipline and putting the stability of that boat at risk. The NOI management and Ministry for Social Care are complaining about 38 million levs (i.e. some DEN 38 million) worth deficit despite the planned surplus of 142 million levs, which brings into question the payment of pensions until the end of the year. Practically at the same time when NOI and Ivan Nejkov, Minister for Social Care, were trying to think of ways to increase the collection of social security contributions, another Minister from the Cabinet of the United Democratic Forces (ODS) - Muravej Radev who is in charge of finances - informed the Parliament about the tragic state in communes.

    After the elections the situation is close to total financial collapse and it is still uncertain how will the last three to four incomes for 1999 be paid. Both cases are overlapping not only in respect of time, but in respect of subject matter too. Practically, both Minister Nejkov and Radev have the same task - to secure regular payment of pensions and wages to public sectors employees till the end of the year, and at the same time to avoid the depletion of the budget, as well as mass protests of dissatisfaction in the country. And although there is less than a month left till the beginning of the next year, this does not make the problem any easier as payments have been delayed for months in some places. According to the latest statistical data, the average September income was 210 levs (i.e. DEM 210), with 184 levs in government-financed enterprises and 238 levs in public sector.

    During the year average pensions were between 85 and 120 levs, at maximum. In view of the current prices in the country that is absolutely not enough for a normal life. It is even harder to live on that money if the payment of incomes and pensions is irregular. Hardest hit are families in which both spouses work in enterprises financed by the commune which are facing a collapse. And such communes which are on the verge of financial collapse and whose losses are growing with each day, are many. Even before local elections in October, there were indications that some Mayors have used up their communal budgets in the first nine months. When their successors took over in late October, they found out that the commune owed huge amount to its staff, energy and fuel suppliers for hospitals, schools and other institutions which are financed by the commune.

    It turned out that doctors and teachers are in the worst situation because of the way the communal presidents have treated them. Some of them have just received their September or October incomes. In other places they are still waiting for them, although it is unclear when will they get them. According to the data of the National Statistical Institute, the average income in the health sector is 151 levs and in education - 191 levs.

    Before the elections the Government justified this situation with poor economic results of the communes. The opposition was in power in 190 out of the total 262 communes and frequently accused the authorities of having condemned local administrations to slow death. For its part, the authorities gave information on financial speculations. However, elections results are known and although local authorities have been replaced in many towns, the problems remained the same. In late October the communes had 220 million levs of uncovered expenditures, which are expected to reach 40 million by the end of the year. Only urgent payment of incomes, welfare allowances and heating costs can buy social peace. The problem is that there is no money for that in the budget. At the moment, the communes can secure 100 million levs, at maximum, and this would mean that government financed enterprises would not receive their usual annual bonus. The deficit could also be covered with funds earmarked for 2000, but that would only create a different problem. According to expectations the budget will be even lower next year and thus not sufficient for covering outstanding debts from the past. Similar is the situation with payment of already modest pensions.

    Prime Minister Kostov has publicly criticised the NOI and Social Care Minister Nejkov for being unable to secure enough funds. "Don't you understand that in order to give you money I have to take it from someone else. Should I take it from orphans? Don't you see that NOI is undermining financial discipline? It turns out that in Bulgaria only the Government is on board currency boat", reproached Prime Minister his staff before the media representatives.

    Major problem of the NOI management is the non-payment of social insurance contributions by a few, but large-scale debtors. These are mostly firms in financial difficulties, such as the metallurgy combine "Kermikovci" near Sofia, "Neftohim" refinery near Burga, etc. According to calculations, the planned inflow of 2.2 billion levs will be reduced to only 1.97 billion levs in real terms, which means that only 88 percent of dues will be collected. At the same time, costs for the payment of pensions and allowances have reached nearly 100 percent. First steps aimed at forcing the large debtors to pay their dues were taken soon after Ivan Kostov's attack. Legal regulations were amended so that now the non-payment of social insurance contributions will be punishable by prison.

    There still remains the problem of 728 thousand people who are not paying social insurance and another 300 thousand who receive fictitious minimal wages. It is still unclear how will this problem be solved, but one thing is certain - the Government will do everything in its power to secure funds for the payment of wages and pensions till the end of this year. Possibility of many Bulgarian citizens being left without wages in the last winter of this millennium is too grim and undesirable for the Bulgarian Government at the time when it is expecting an invitation to negotiations on joining the EU and elimination of Shengen visa restrictions. Financial stability is one of the most important preconditions for Bulgarians to be allowed into the entrance hall of United Europe. Unfortunately, the majority of the population does not fall into this category.

    Georgi Filipov

    (AIM)