2. Measures on the expenditure side – impact on quality of public finances
State Budget for 2006 restates that social security system, health care and education are priority areas in
the public administration reform. Also it sets down a restructuring of public administration, that includes
a rationalization of public departments and infra-structures. These reforms are laid down in a multi-
annual programme (2006 to 2009) for reducing public expenditure. The Technological Plan, on the other
side, sets goals to be reached by 2010 redirecting public expenditure to enhance growth.
2.1. Health
Public sector hospitals are being transformed into public corporations, which are financed and managed
according to market principles. These hospitals have contracts with the Health Ministry, which foresee
that they are financed according to their output. Since this process started at the end of 2002, the results
will become evident only in some years, but it is expected that the efficiency and savings gains will
contribute towards a more sustainable growth path of health expenditure growth.
Also the drugs policy changed, involving the promotion of generic drugs, the diminution of
reimbursements, and the liberalization of medicines not subject to medical receipt.
2.2. Social security
A reform of general social security retirement scheme was implemented in 2001, which changed the
benefit formula and retirement age rules. There have been also important changes in civil servants
pension scheme since 2004, aiming towards a convergence to the less generous general system scheme.
As the civil servants subsystem will close by end-2005 the transition period to the general system scheme
is as follows:
- all civil servants taken on after 1 January 2006 will accede the general system;
- there will be a gradual increase of the retirement age from 60 to 65, to be completed by 2015.
There will be as well an increase of the period that confers the right for a complete pension from
36 to 40 years by 2013; - there will be an adjustment of the pension benefit formula so that pension will be based on the
wages during the entire working career instead of the last wage received.
Additionally, all special retirement schemes not complying with the general system rules will be
eliminated and a pension ceiling will be introduced.
The alignment of civil service regime to the less generous private sector regime has been an important
step in the social security reform. Nevertheless, more remains to be done to ensure the sustainability of
the overall pension system. Realizing that, the government has commissioned a report to assess the long-
term sustainability of the social security that is scheduled for the last quarter of the current year.
2.3. Education
Current measures for reducing expenditure in basic and secondary education^ are aimed at making better
use of existing resources. Schools with a reduced number of pupils in basic and secondary education are
being progressively closed down and there have been changes in teachers job descriptions (aiming at
curbing underutilisation of teachers working time). Some gains are expected due to the increase in
efficiency and better allocation of resources.
The Government, in the Technological Plan, reassures this area as one of its priorities, and specifies the
following goals: