IMF calls for transparency on pension contributions

IMF calls for transparency on pension contributions

Dorcas Chigodho

Staff Reporter

HARARE, The International Monetary Fund (IMF) says there is no transparency in the recording of pension’s contributions in government and there is need to ensure clear recording of pension obligations for the country’s’ six non-autonomous pension schemes.

In a Zimbabwe country report, IMF said pension contributions are currently being recorded with little transparency and on a cash basis that does not allow for monitoring of the performance, sustainability and solvency of these schemes.

There exist six non-autonomous social insurance schemes for public sector employees which include the new Public Sector Pension Fund (PSPF), the Grain Marketing Board Pension Fund (GMBPF), Local Authority Pension Fund (LAPF), National Railways of Zimbabwe Pension Fund (NRZPF), Unified Councils Pension Fund (UCPF), and Zimbabwe Electricity Supply Authorities Pension Fund (ZESAPF).

There is one autonomous fund which is the National Social Security Authority (NSSA)
According to IMF the activities of government non autonomous pension funds were reclassified to accommodate the cash accounting system currently being used in Zimbabwe.

“Under this classification, revenues which are explicitly collected (or deducted) for pension schemes (i.e. employee pension contributions), are classified as other social contributions in government revenue, and actual social contributions in government expense. Pension benefit payments under these schemes are recorded as employment related social benefits. Note that this cash-based system is not optimal as no liabilities are realized in the form of pension obligations,” Noted IMF.

This, means that monitoring and evaluating the sustainability of these schemes is not possible under a cash-based system of accounting.

“Going forward the government should move to a modified cash-based system that begins to record these obligations below the line,” said IMF.

IMF added that authorities should have clear statistics relating to each of these schemes and move to a modified cash basis of reporting for these schemes.

Meanwhile on NSSA, while financial statistics exist for the social security fund IMF said they were not integrated with other general government statistics.

“The National Social Security Authority (NSSA, which covers the general Zimbabwe population, does produce and publish financial statements but are compiled using an IFRS presentation. It would be useful for the authorities to begin classifying NSSA financial statements in a GFSM 2014 presentation to allow or better integration of this data with other parts of the general government.

The mission recommends that the authorities expand coverage of GFS to include local authorities, EBUs, and the social security fund. In order to achieve this goal greater cooperation and communication across ministries is essential and should ensure compliance with the PFMA and the transmission of financial statistics in a unified framework to the AG’s office in the MoFED,” noted IMF.