Gov't to cure pension huge pension funds backlog through bond issue?

The Cabinet later this month will discuss a bill allowing it to convert part of the state debt owed to private pension funds into tradable zloty bonds, Labor Minister Jerzy Hausner told a news conference on Friday. The funds, set up in 1999 to supplement the pay-as-you-go scheme, manage nearly $6 billion worth of assets, but problems with a computer system have caused a massive overhang of transfers from the state Social Security Administration (ZUS). The new bill will allow for paying the overdue transfers, which at the end of last year amounted to zl. 5.5 billion in back premiums plus another zl. 1.8 billion in interest. "It envisages the debt will be paid partly in cash and partly in bonds," Hausner said, declining to reveal any details. According to Rzeczpospolita, the bill foresees pension funds being paid the back premiums by the end of 2007. Early this year the Labor Ministry said that up to 80% of the outstanding debt could be converted into bonds priced at market levels, with the remaining of the principal and interest due to be paid in cash. Analysts say that after the funds obtain the government bonds, which will inevitably boost the share of treasuries in their portfolios, they may intensify their investment in stocks to keep the current level of equity exposure. (Reuters)