Monday, 13 February 2023 14:44

El Salvador must strengthen the financial sustainability of the pension system

Written by Evelyn Alas

The International Monetary Fund (IMF), during its visit to El Salvador, said that given demographic trends, it is still necessary to strengthen the incentives and financial sustainability of the pension system to limit contingent liabilities and encourage the development of the capital market.

The characteristics of the pension system after the recently enacted reform according to the IMF should be periodically evaluated based on a new independent actuarial study.

Reforma de pensiones en México 2020: 5 puntos clave para entenderla - Uno TV

Specifically, the 30% increase in pension entitlements will accelerate decreases in funded accounts and will likely result in higher liabilities for the Central Government in the medium term.

Pensiones | Gerencie.com

Similarly, although the proposed debt swap between the old bonds issued by the Fideicomiso de Obligaciones Provisionales (FOP) and the new bonds issued by the Instituto Salvadoreño de Pensiones (ISP) could provide some temporary cash relief to the government, it would reduce the funds available for private investment and accentuate the concentration of funds in public sector securities.

Cuántas pensiones puede recibir una persona en Colombia? | Gerencie.com

Importantly, the reform could create large contingent liabilities, as the new law grants a blanket public guarantee for all pension-related entitlements.

 

Translated by: A.M