The Inter-American Development Bank today announced the approval of a $5 million loan to the Dominican Republic to finance technical support for carrying out a pension reform that will broaden and deepen the country’s social security system to cover vulnerable sectors of the population.
The resources will assist the development of necessary regulations for properly functioning of the Superintendencia de Pensiones* and will finance specialized technical assistance and training for the superintendency’s personnel, procurement of the necessary information technology systems and organization of a process to identify participants in the new system and issue identification cards.
The project include technical support to the Consejo Nacional de Seguridad Social** for the procurement of needed data for the financial and actuarial valuation of supplemental regimes and existing pension plans and the design of a system for calculating and allocating acceptance bonds for transfers from the current systems to the new one. Also, data will be collected to properly access the various costs and implications of the pension reform, and tools will be established for proper monitoring.
The resources also will assist the Dirección de Información y Defensa del Afiliado*** in the development of an adequate strategy of public information dissemination on the new pension system.
The Dominican Republic’s Congress adopted a social security reform law in 2001 designed to correct a situation in which the country has one of the lowest pension coverage rates in Latin America – about 18 percent of the economically active population is covered, compared with 35 percent for the region as a whole.
The new law contains widely accepted general principles regarding capitalization of individual accounts and private sector involvement in administering pension funds.
The program is consistent with the IDB strategy of preserving the Dominican Republic’s economic growth and stability while reducing the country’s fiscal and financial vulnerability and improving its capacity to provide social services.
The IDB loan is for a 25-year term, with a three-year grace period, at the variable annual interest, now 5.39 percent. Local counterpart funds total $700,000.