SLOVENIA - Slovenia needs to "urgently" overhaul its pension system to prevent an increase in borrowing costs and help maintain long-term fiscal stability, the International Monetary Fund said.
"A rejection of the pension reform would be a negative element for the credit assessment agencies," Antonio Spilimbergo, head of the Washington-based lender's mission to Slovenia, told reporters in the capital Ljubljana today.
"Slovenia must carry out the pension reform as an urgent condition to maintain fiscal stability. A rejection would see an immediate impact on the cost of borrowing."
The former Yugoslav republic's Constitutional Court ruled on March 14 that a referendum on the pension reform, demanded by the trade unions, can take place after lawmakers agreed to increase the retirement age to 65.
The move will probably delay spending cuts as the government strives to narrow the budget deficit, which ballooned during the global recession.
Slovenia's export-driven economy has been hit "hard" by the global decline, according to the IMF and is forecast to expand an annual 2% this year and 2.4% in 2012.
"The financial sector has also been hit particularly hard because it relied on external financing before the crisis erupted," Spilimbergo said. "Slovenia cannot expect to see economic growth level as before the crisis."
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