IMF backs PH military pension fund reform
LAPU-LAPU CITY, CEBU—The International Monetary Fund (IMF) echoed Finance Secretary Benjamin Diokno in raising the alert on rising government liabilities related to pensions of military and uniformed personnel (MUP), which the multilateral institution said might crowd out spending for social and infrastructure initiatives.
Shanaka Jayanath Peiris, chief of the regional studies division at the IMF Asia and Pacific department, said the Washington-based lender considered the need to reform the military pension system as one of the most important structural challenges that the Philippine government was facing in addition to an ongoing, long-drawn tax reform campaign.
Peiris was speaking at a press briefing held in this city on the opening day of the two-day Financial Stability Conference jointly convened by the Bangko Sentral ng Pilipinas (BSP) and the IMF.
He noted that as the national government was working on reducing the debt stock as well as the budget deficit to more prudent levels, it was crucial not only to increase revenues but also to address strains on the spending side.
“Military pensions are indexed to current wages and it’s kind of going up very fast,” Peiris said. “At the moment, it is already quite large, but could really balloon and eat a large share of the budget, if it is not addressed and reformed.”
“This would crowd out social and infrastructure spending,” he added. “That reform program, outside the revenue measures in the pipeline, is probably the most important to maintain the fiscal consolidation, but without hurting the social or infrastructure push.”
Diokno’s warning
Diokno earlier warned of a “fiscal collapse” that may arise from the MUP pension problem, flagged as an “unfunded” liability that is expected to exceed P1 trillion by 2035 from P213 billion in 2023.
By describing it as unfunded, the finance chief meant that MUP pensions were shouldered fully by the government through borrowings, without any contribution from the pensioners themselves.
The MUP collective includes the officers and enlisted personnel of the Armed Forces of the Philippines, Bureau of Jail Management and Penology, Bureau of Fire Protection, Philippine National Police, Philippine Public Safety College, Philippine Coast Guard and the Bureau of Corrections.
Diokno is pushing for a unified separation, retirement and pension system for the MUP, which means a reformed pension system “should apply to those in the active service and new entrants, and members across all MUP agencies.”
At the ongoing BSP-IMF conference, the joint hosts have gathered representatives from 14 central banks and financial authorities from the region as well as six regional and global organizations, and 31 private-sector entities.
BSP Senior Assistant Governor Johnny Noe Ravalo told reporters that the forum was intended to be “a meeting of minds,” to exchange ideas about how economies within the region may manage in concert the financial and systemic risks they were facing. INQ
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