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June 30, 2022

Mugur Isarescu cautions pension deficit hampers investments

National Bank governor Mugur Isarescu warned on Wednesday that the important pension deficit prevents far-reaching public investments, stressing that Romania’s pension system is not functional, Realitatea.net informs. “You cannot build expressways with a deficit which absorbs all the resources from public budget,” Isarescu explains. “The viability of pension system depends on contributions, and as long as productivity is low, there aren’t contributors, and then you cannot pay pensions and also build highways because the budget deficit will grow. We either pay the pensions or build expressways,” BNR governor said.

He reminded that Romania must cut its deficit to 3 per cent of GDP, a ceiling established through the EU Stability pact, which is also necessary for the accession to the Euro zone. Isarescu cautioned that many Romanians don’t understand yet how the public pension system operates, that it is built on the principle of solidarity between generations, and have the impression that the pension cashed by a person comes from the contribution of that person, like in the case of an accumulation fund. “Pensioners are not paid from a fund accumulated from what they paid, but from the active population’s contribution over a certain time span,” he said.

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