Georgia’s divisive pension reform splits opinion
Georgia’s parliament finally adopted a new pension law on July 21, its third hearing. According to the country’s deputy minister of economy Ekaterine Mikabadze, whose ministry initiated the law, the primary goal of the pension reform is to improve the ratio of pension income to earned salary, and to ensure fiscal sustainability.
“The introduction of pension reform could potentially be complementary to the effort to develop the Georgian capital market by supporting the accumulation of professionally managed savings,” Ms Mikabadze told Emerging Europe. “These savings might be invested both in corporate bonds of different maturities (supporting an increase the liquidity) and in standardised, high-quality financial assets issued by private companies. This can be expected to facilitate access to capital and to reduce the cost of financing.”
The new pension system is not entirely mandatory and applies only to employees under 40. According to Ms Mikabadze, voluntary enrolment in pension saving schemes is not enough even in developed countries, and that it will be necessary to establish an effective operating fund and the development of a culture of saving, which does not yet exist in Georgia.
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