IMF suggests Peru carry out a pension reform and make adjustments to its tax policy

The International Monetary Fund (IMF) published today, March 7, its final statement on its mission in the Peru and pointed out that our country urgently needs a pension reform. This, with the aim of reducing the risks of poverty in old age.

The international organization indicated that withdrawals from pension funds in the last two years have increased the challenges of low coverage and adequacy of the pension system, for which it considers that a reform solution requires a broader contribution base and higher contribution rates.

Another point addressed by the IMF is the efforts that the authorities have made to address the tax compliance gap; however, he adds, that Peru’s tax collection is relatively low compared to its regional peers.

In this sense, he pointed out that to address key needs in education, health and social policies -including pensions- where the Peru presents significant gaps will require continuous efforts to improve tax collection, as well as adjustments in tax policy.

“A medium-term spending strategy would help articulate priorities for the use of additional resources while identifying areas for savings, including through better targeting of social benefits and a comprehensive reform of the civil service”, indicates the institution.

The IMF forecast that the fiscal deficit would be around 2.7% of GDP in 2022, reflecting a prudent budget that foresees greater spending on health, education and social protection, which makes the public debt sustainable and has some fiscal space.

“Given that the outlook is very uncertain, the authorities should prepare contingency plans to contain the gaps. Upside surprises should be used to rebuild fiscal buffers. With the decreased need for support related to COVID-19the use of emergency procedures to appropriate budgetary resources must be gradually eliminated”, he affirmed.