Publication: Monitor Volume: 3 Issue: 95

Arrears in social welfare payments were at the top of the agenda during First Deputy Prime Minister Anatoly Chubais’s visit to Krasnoyarsk on May 13. At the beginning of the year President Yeltsin pledged to clear all pension arrears by July 1. Chubais told the gathering of Siberian leaders that pension arrears currently stand at 12.5 trillion rubles ($2.2 billion). On top of that are arrears of 8 trillion rubles in child allowances, and 13 trillion rubles in wages for public sector workers. Chubais admitted that, in addition to the planned budget sequestration, the government must find an additional 30 trillion rubles revenue in order to ensure that pension arrears are paid off as promised. (Interfax, May 13)

According to Vasily Barchuk, the head of the Pension Fund, the debt to pensioners has been falling, from 17 trillion rubles on February 1 to R10.5 trillion on May 1. (Trud, May 7) Most of these unpaid pensions have been carried over from 1996. In most regions current pensions are being paid, although in Kemerovo and Rostov there is a two-month delay. The Pension Fund is independent of the federal budget, but is unable to meet its obligations due to delays in the payment of contributions from businesses and from government agencies. Firms are supposed to pay 29 percent of their payroll to the Pension Fund: many fail to do so even while they continue to pay wages. The backlog in contributions to the Pension Fund is now 61 trillion rubles, of which budget organizations owe 6.5 trillion. Pension contribution arrears are even higher than wage arrears, which now total some 2 trillion rubles.

The federal government has been bailing out the Pension Fund, transferring 10.3 trillion rubles from February through April. However, during that period there was a 5.5 trillion shortfall in business contributions. Ironically, the government’s pledge to bail out the fund may have encouraged firms to slow down their payments. Barchuk says the Finance Ministry has even instructed defense plants receiving money from the federal budget to spend it all on wages and hold back the pension contributions.

The government criticized the State Duma for its April 22 decision to index pensions by 13 percent from March 1, which will cost an additional 10 trillion rubles this year. The new minimum pension will be 78,620 rubles ($14). (Izvestia, April 23) By law indexation should take place four times a year, but the last indexation was in May 1996 All subsequent efforts by the Duma to raise pensions have been vetoed by President Yeltsin. Even though inflation has now reached 18 percent per year, the real purchasing power of pensions continues to erode.

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