IMF calls for more structural reforms

The ageing population is putting pressure on the social security system Keystone

The International Monetary Fund (IMF) has urged Switzerland to push on with reforms to its social security and pensions sectors, and open up its markets.

However, in its annual report on Switzerland, which was released on Monday, the IMF also had words of praise, assessing the prospects for the Swiss economy as “positive”.

Economic growth in the coming year is expected to continue to benefit from the gradual recovery in the euro area and strengthened domestic demand, said a statement on the findings released by the Swiss finance ministry.

It went on to say that the monetary policy of the Swiss National Bank functioned well and that the inflation rate remained “remarkably low” at slightly over one per cent despite the rise in oil prices.

This was put down to a variety of factors, including a moderating effect of structural reforms and market opening on prices.

Federal finances were well under control, reported the IMF and the government was on track to eliminate the governmental deficit by 2007.

No waiting

However, the IMF warned that there was still some work to be done.

“Switzerland should not wait until the future comes to carry out reforms in fiscal and structural policy,” Bob Traa, head of the visiting IMF delegation, told a news conference in Bern.

This could lead to some options no longer being open, added Traa.

The IMF said that pressure – from an ageing society – would continue on social security and that further reforms on both expenditure and revenue were needed.

It praised changes to invalidity insurance as a first step but added that corrections to benefits needed to be accompanied by higher revenues. Better coordination between the federal authorities and the cantons was deemed essential to slow down spiralling health costs.

The IMF also welcomed proposals to reform pensions, including a controversial plan to raise women’s retirement age to 65.

Pensions time-bomb

In the area of occupational pensions, the IMF said that underfunding seemed to be understated.

The IMF deems the current decentralised system of supervision in occupational funds to be inadequate and uneven. It therefore recommends a more centralised and harmonised supervisory system, it said.

The IMF is to make a separate evaluation of the sector.

Switzerland also needs to speed up the opening of its markets and strengthen competition. A reduction in trade barriers in the agricultural sector – which is fiercely opposed by Swiss farmers – would benefit the poorest developing countries, it added.

The IMF’s assessment comes after the Organisation for Economic Cooperation and Development (OECD) called on Switzerland earlier this year to speed up economic reforms.

The OECD said that welfare, competition, education, fiscal and tax reforms did not go far enough and were moving too slowly.

swissinfo with agencies

Key facts

Switzerland joined the IMF in May 1992.
The IMF carries out an annual assessment of the economic and financial situation in Switzerland, as it does for all its members.
An IMF mission was in Switzerland from February 24 to March 6 to conduct the consultation.
It met representatives from the federal administration, the Swiss National Bank, the private sector and civil society.