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Kyrgyzstan
Social Welfare
Like the other former Soviet republics, Kyrgyzstan inherited
a social welfare system that allocated benefits very broadly without
targeting needy groups in society. In this system, nearly half
of society received some sort of benefit, and many benefit payments
were excessive. By necessity, the post-Soviet government has sought
to make substantial reductions in state social protection payments,
emphasizing identification of the most vulnerable members of society.
The Soviet Heritage
In 1991, the last year of the Soviet Union, the payment of pensions,
child allowances, and other forms of support amounted to 18 percent
of the Kyrgyz Republic's gross domestic product (GDP--see Glossary).
At that point, about 600,000 pensioners and 1.6 million children
received some form of payment. Eligibility requirements were extremely
liberal, defined mainly by age and work history rather than by
social position or contributions to a pension fund. This generous
system failed to eliminate poverty, however; according to a 1989
Soviet survey, 35 percent of the population fell below the official
income line for "poorly supplied" members of society. Thus poverty,
which became an increasingly urgent problem during the economic
decline of the transition period of the early 1990s, already was
rooted firmly in Kyrgyzstan when independence was achieved.
Reforming Social Welfare
The Akayev government addressed the overpayment problem by reducing
categorical subsidies and government price controls; by indexing
benefits only partially as inflation raised the cost of living;
and by targeting benefits to the most needy parts of society.
Under the new program, child allowances went only to people with
incomes below a fixed level, and bread price compensation went
only to groups such as pensioners who lacked earning power. By
1993 such measures had cut government welfare expenses by more
than half, from 57 percent of the state budget to 25 percent.
Nevertheless, the percentage of citizens below the poverty line
grew rapidly in the early 1990s as the population felt the impact
of the government's economic stabilization program (see Economic
Reform, this ch.). In addition, the Soviet system delegated delivery
of many social services, including health, to state enterprises,
which in the post-Soviet era no longer had the means to guarantee
services to employees (or, in many cases, even to continue employing
them). The state's Pension Fund (a government agency with the
relatively independent status of a state committee) went into
debt in 1994 because workers who retired early or worked only
for a short period remained eligible for pensions and the poor
financial state of enterprises made revenue collection difficult.
The pension system is supported by payroll taxes of 33 percent
on industries and 26 percent on collective and state farms. Besides
retirement pensions, disability and survivors' benefits also are
paid. Of the amount collected, 14 percent goes to the labor unions'
Social Insurance Fund and the remainder to the Pension Fund. The
standard pension eligibility age is sixty for men and fifty-five
for women, but in 1992 an estimated 156,000 people were receiving
benefits at earlier ages. In 1994 the minimum pension amount was
raised to forty-five som (for value of the som--see Glossary)
per month, the latest in a long series of adjustments that did
not nearly keep pace with inflation's impact on the real value
of the pension.
New pension legislation prepared in 1994 made enterprises responsible
for the costs of early retirement; established a five-year minimum
for pension eligibility; clearly separated the categories of work
pensions from social assistance payments; abolished supplementary
pension payments for recipients needing additional support; eliminated
the possibility of receiving a pension while continuing to work
(the position of an estimated 49,000 workers in 1992); and provided
for long-term linkage of contributions made to pensions later
received.
Child allowances are paid for children up to the age of eighteen,
and a lump sum payment is made on the birth of a child. In 1991
child allowances consumed 6.7 percent of GDP; since that time,
targeting of benefits has been a major concern in this category
to reduce spending but cover vulnerable groups. The first alteration
of eligibility standards occurred in 1993. Cash for this category
is provided by direct transfers from the state budget combined
with Pension Fund contributions.
Besides pensions and family allowances, Kyrgyzstani citizens
also receive maternity benefits and sick pay covered by the Social
Insurance Fund, which is managed by the Federation of Independent
Labor Unions and the individual unions; it receives money only
from its 14 percent share of payroll taxes, not from the state
budget or individual contributions. All public and private employees
are eligible for sick leave, with payments depending on length
of service. The maternity allowance is a single payment equal
to two months' minimum wage. World Bank experts consider the sick
and maternity benefits excessive in relation to the state of the
economy and the state budget.
In assessing the future of social assistance in Kyrgyzstan, experts
predict that economic restructuring through the 1990s will increase
the number of citizens requiring assistance from the state system.
To meet such needs, thorough reform of the system--aimed mainly
at tightening eligibility standards--will be necessary. It is
also expected that Kyrgyzstan will require other methods of social
assistance to provide for individuals who do not fall into existing
categories, or for whom inflation erodes excessively the value
of payments now received. The officially and unofficially unemployed
(together estimated at 300,000 at the end of 1994) are an especially
vulnerable group because of the unlikelihood of workers being
reabsorbed rapidly into the country's faltering economy. (Unemployment
benefits are paid for twenty-six weeks to those who register,
but the number of "non-participants" is much greater than the
number of registered unemployed.)
Data as of March 1996
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