The Finance Ministry on Thursday presented an upgrade of the Social Insurance Fund’s (TKA) investment framework and the method for repaying the state’s debt, in the context of public finances, during a session of the Labour Advisory Body.
According to the presentation, the decision to end state borrowing from the Fund and to gradually repay the existing debt is directly linked to pension reform, the Fund’s future investment policy and public debt management.
At the core of the approach is the balancing of three key parameters: the sustainability of the Fund, fiscal stability and the management of state borrowing.
The main policy objective, the ministry said, is to identify the scenario that best serves the public interest in the medium and long term.
The Labour Minister stated that repayments will be linked to public debt levels, with the state making instalments only when debt falls below a specific share of GDP. Annual payments will be channelled into a dedicated investment account and invested within a low‑risk framework.
Data presented show that the Fund’s revenues rose to €3.47bn in 2025, more than double the €1.49bn recorded in 2016. At the same time, government expenditure linked to the Fund also increased significantly over the past decade, largely due to higher interest payments on reserves invested with the state.
Scenarios
State borrowing from the Fund has so far helped cover financing needs and refinance debt, reducing reliance on international markets and contributing to a decline in public debt to 55.3% of GDP by the end of 2025.
However, the gradual repayment of the Fund’s reserves and the end of state borrowing are now considered necessary as part of pension reform and the shift to an independent investment policy.
The baseline scenario assumes moderate growth and inflation, with borrowing costs and investment returns remaining within stable ranges. It foresees a gradual repayment path and a smooth transition, despite somewhat increased financing needs.
Under this scenario, the Fund’s reserves are projected to reach €79.5bn by 2060, while public debt is expected to fall further to 25.4% of GDP.
Investment mechanism
The ministry stresses that a robust investment management mechanism must be secured before repayments begin in 2027.
A proposal is being prepared, including the possible involvement of international organisations such as the IMF, the World Bank, the EU and the ILO. The aim is to separate the management of the Fund from the Finance Ministry and assign it to an independent investment body.
Risks and conditions
Among the risks identified, increased debt issuance could raise borrowing costs and limit fiscal flexibility, while a deterioration in public finances could hinder the repayment programme.
Successful implementation depends on strong governance structures, strict fiscal discipline and a credible investment framework for the Fund’s reserves, along with safeguards to manage adverse economic conditions.
