Government Dips Into Pension Fund for $334M

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By Marco Echevarria

Patricio Pineda, of the Labour Bureau for a Dignified Pension, notes that the government has taken more than necessary from the pension fund to pay retirees

Patricio Pineda, of the Working Table for a Dignified Pension, said that the Government of El Salvador has taken more than $334 million from the pension fund to pay for the retirements of people under the public system, related to the Salvadoran Social Security Institute (ISSS) and the National Pension Institute of Public Employees (INPEP).

As part of a television interview in Frente a Frente Frente, the expert showed an actuarial study carried out by the institution to which he represents, where the money needed to cover this item is calculated.

For the Working Table for a Dignified Pension, in 2023 it took about $675 million for the whole year. However, the Government of El Salvador took $1,009.74 million between April and November 2023.

The collection of these funds is carried out through the Certificates of Security Obligations (COP), securities issued by the Salvadoran Pension Institute (ISP), created by the law promulgated by the Legislative Assembly in December 2022.

The POPs are an instrument through which the State provides resources to Pension Fund Administrators (AFP), in which Salvadorans with formal employment are obliged to contribute monthly to pay retirees from the public system (ISSS and exInpep).

I came to sit here a month ago and made the prediction that the government would take more than $1 billion from the pension fund. “Honestly, we are not mistaken…The president of the Salvadoran Pension Institute (ISP) is getting a goal to get in by issuing an amount that the government really doesn’t need,” Pineda said.

The expert has pointed out on many occasions that this inconsistency between what is needed and what the Government has taken can only result in the money being used for purposes other than those provided for by law and that it could even be used for current expenditure.

In mid-December, Pineda again warned that El Salvador is entering a situation of danger to the sustainability of the pension system, due to the government’s takeover of funds.

Pineda pointed out that to make him face the forecast commitments there is a little more than $4 billion, but warned that if the pace (of broadcast) remains, in three years this falls.

The figure taken this year is in addition to the previous debt to workers for $8,396.81 million in Transitional Financing Certificates (CFTs), which replaced other certificates provided for in the Trust of Security Obligations (FOP) that was issued in December 2022.

Between the two instruments, the state debt to pension funds reached $9,406.55 until November 2023.

This article has been translated from the original which first appeared in El Salvador