FBiH Government to Consider 10% Pension Increase for Those Retired by 31 July 1998

After analyzing information from the Federal Pension and Disability Insurance Institute, the FBiH Government concluded today that there are no financial possibilities for a 10% increase in all pensions. It also concluded that through a new law on pension and disability insurance, it will consider a solution that would increase pensions achieved by 1998 by 10%, as well as pensions achieved from 1998 to 2007, and others, in accordance with the financial capabilities of the Federation of BiH, reports the Patria agency.

The position of the FBiH Government is that the latest amendment to the current Law on Pension and Disability Insurance, which received support from the House of Representatives of the Parliament of the Federation of BiH, is completely contrary to the entire concept of pension system reform in the FBiH, and in case of adoption of the amendments, it will consider the possibility of initiating a procedure to verify the method of proposal and adoption.

The Federal Government believes that any early retirement under the current Law on Pension and Disability Insurance further jeopardizes the entire pension system in the Federation of BiH and calls into question the timely payment of pensions at the achieved level.

The information from the Federal PIO Institute states that in 2016, the average number of pensioners was 404,164. That year, the PIO Fund recorded a loss of 38,310,730 KM, to which should be added the loss from 2015 of 141,575,945 KM, totaling 179,886,675 KM of last year's accumulated loss.

According to the financial plan for 2017, the pension system in the Federation of BiH should achieve a surplus of 1,905,669 KM in revenues over expenditures, thereby reducing the total accumulated loss from the previous year by that amount.

The average number of pensioners in 2017 is 409,355, and to ensure regular payment of pensions, the Federal PIO Institute borrowed 74 million KM from commercial banks and uses a loan of 41 million KM from BH Pošta.

In the event that from August 1, 2017, the amount of pensions is increased by ten percent exclusively for pensioners who retired by July 31, 1998, the projection of the financial result over the next four years shows a gradual reduction of the accumulated deficit to 112,686,968 KM in 2020.

However, if pensions were increased by 10 percent for all pensioners, the accumulated deficit would amount to 262,981,006 KM in 2017, 351,902,514 KM the following year, increase to 454,055,342 KM in 2019, and reach 534,017,652 KM in 2020.

Therefore, regardless of the expected growth in revenues in the coming period (revenues from contributions and transfers from the FBiH budget), in the case of an increase in the payment coefficient by 10 percent for all pensioners, it is realistic to project an increase in the deficit in the FBiH pension system over the next four years.

The only way to finance the missing revenues to cover the projected deficit is from the FBiH budget funds.

In the case of an increase only for those retired by July 31, 1998, transfers from the budget would increase from 253,862,257 KM in 2017 to 322,842,129 KM in 2020. In the same period, if all pensioners were included in the increase, budget transfers would rise from 333,115,820 KM to 421,242,508 KM.