After initially reporting that the promised pension increase from MVR2300 to MVR5000 could not be done this month, the Maldives Pension Administration Office (MPAO) today confirmed that it is working to transfer the MVR5000 by tomorrow.
The CEO of the office had yesterday told Haveeru that it had not received the additional funds for the increase and that it would therefore transfer the current MVR2300, giving the rest when the government released additional funds.
“They are doing this to fulfill a government pledge. This has nothing to do with the pension fund. We will not increase it to MVR5000 by taking money from that fund. What we will do is transfer it when the government provide us with it,” Manik was quoted as saying.
The state funded pension for all citizen’s above the age of 65 was introduced in 2009 at MVR2,000, and was later increased to MVR2,300 through an amendment to pension legislation.
A further increase to MVR5000 – starting from March 2014 – was an election pledge of President Abdulla Yameen, though changes to the amount disbursed from the existing pension funds will require another amendment to the act.
Cabinet minister Ahmed Adeeb has recently assured that the increase would take place in March as promised, saying that it can be funded through a sustainable model based on long term bonds and T-bills.
Adeeb also talked about the prospect of combining various funds such as housing, health insurance, and pension funds into a single fund.
The government had already allocated MVR470 million (US$ 30.5 million) in the state budget for the MVR2,300 allowance (US$149). These funds will now be invested in the retirement pension fund or in financial instruments such as T-bills in order to generate the monthly MVR5000 stipend, Adeeb has said.
Following Manik’s comments yesterday, Adeeb told Haveeru that the delay was due to the first of the month falling on the weekend and “because it is a new allowance”.
Yesterday, MPAO CEO Manik stated that eighty percent of the pension funds are already being invested in T-bills sold by the government to finance the budget deficit, and that discussions with the government are underway to invest the rest of the funds in bonds.
While the government maintains this to be a sustainable model of financing the increase in pensions, critics have argued that, with a MVR1.3 billion (US$84.3 million) deficit budget, the move will plunge the country further into debt.
“These are loans, and taking loans is acceptable to invest in to increasing productivity. But this is not such an investment, this is something the government is spending. Eventually people will have to bear the burden of this,” former Economic Development Minister Mahmud Razee has remarked.
Last December, the central bank and regulator – the Maldives Monetary Authority – advised the state to pay all due treasury bills and treasury bonds and to turn existing short-term debts into long-term ones.