Diana Dragutinović: “From the budget firstly for the neediest”

If September pensions were to see extraordinary increase of 10 percents, and seven percents in October based on regular indexation policy, the total pensions’ nominal growth in this year would reach round 40 percents, while their real growth, aligned with this year’s inflation of some 12 percents, would be 28 percents. In no country is possible, that with production growth levels of 7-8 percents, incomes of 1.6 million population, in this case the pensioners, have real growth of 28 percents without that causing significant inflator pressures, said for Politika daily Minister of Finance Diana Dragutinović, PhD.

The Minister is in favor of differentiated pensions’ increase which would reduce the gap between minimal and maximal pensions, i.e. pro increase of the minimal pensions only. However, she is against Regulation that would, according to the Prime Minister’s announcements, secure extraordinary pensions’ increase as of September because the Law regulating pensions issue is in force.

Interview for Politika daily, July 31, 2008

If September pensions were to see extraordinary increase of 10 percents, and seven percents in October based on regular indexation policy, the total pensions’ nominal growth in this year would reach round 40 percents, while their real growth, aligned with this year’s inflation of some 12 percents, would be 28 percents. In no country is possible, that with production growth levels of 7-8 percents, incomes of 1.6 million population, in this case the pensioners, have real growth of 28 percents without that causing significant inflator pressures, said for Politika daily Minister of Finance Diana Dragutinović, PhD.

The Minister is in favor of differentiated pensions’ increase which would reduce the gap between minimal and maximal pensions, i.e. pro increase of the minimal pensions only. However, she is against Regulation that would, according to the Prime Minister’s announcements, secure extraordinary pensions’ increase as of September because the Law regulating pensions issue is in force.

“Of course it is legitimate to alter that Law. And that is something I would go for. For me the Constitution and laws are sanctums. That is why I would find difficult to see Regulation replacing Law, the same as I could never understand how the bylaws can be senior to the laws and international conventions. I will stand against such practice, for the long I can do so. That is why I find difficult to understand the necessity of a Regulation, when there is agreement on the amendments to the Law.

The Minister of Justice said that when there are changed circumstances (and they obviously exist in this case), then its fine. And that is an excellent argument, but additional expenditures, as a result of the changed circumstances, can not be more than five percents of the total expenditure levels. And they can always be covered with the budgetary reserve funds”, Minister Dragutinović pointed out.

Additionally, she is not in favor of a solution where one pensioner’s check doubles another’s, which is in the essence of the linear increase measure, meaning the same increase levels for everyone. That, according to her, is not socially responsible. Dragutinović says that for the linear increase, significant additional funds are necessary which are not secured in the 2008 budget.

“Hence, the problem is that the spring from which we all drink our water is of almost similar capacity, and requests for increased expenditures are inexhaustible. After three weeks spent in the Ministry of Finance, I see more than clearly that state’s total revenues will be higher then planned 14 billion Dinars, and that is the amount for which expenditures can be increased. Pensions increase of 10 percents already in September, would mean that additional revenues would be almost completely used for that purpose only”, the Minister is pointing out.

She reminded that in this year pensions have been increased on two occasions: extraordinary in January for 11.06 percents – so that average pension could reach 60 percent average salary; and in May 6.97 percents – according to the pensions indexation rule in force.

“Eventually it would all end as it happened in past when we tried something unsustainable – the payments would start coming later and later. If pension-salary relation in 2009 is to be 70 percents, with current tax rate levels, the state could pay less than 10 pensions annually, while in the case of salary-pension 65 percents quota, it could pay 10.6 pensions. Alternatively, we could increase value added tax rate, first in 2008 from 18 to 19 percents, and then in 2009 from 19 to 25 percents. Also, instead of VAT rate, we could increase overall pension and disability security contribution from 22 to 33 percents. In that way, and from the real sources, we could secure pledged standard of living levels for the pensioners, which would of course be paid from the increased tax burden for over four percents GDP, and even more expensive goods”, Dragutinović pointed out.

“From said above, it is clear that this policy is unsustainable”, Politika’s interlocutor says. Because, indigent Serbia, with high unemployment figures, can not have the highest average salary–average pension ratio”.

“Pensions in Serbia are low in average, but the only sustainable way of having them higher in real terms, is to have such policy which will ensure growth in the economy and in employment figures. In the first phase that would imply a good measurement of real ratio between social and developmental goals. In the second is necessary to make adequate balance between various group’s interests, such are pensioners, unemployed, youth and poor ones”, the Minister concluded.

(Author: Biserka Dumić)