SANTIAGO (Reuters) - Chile's lower house will debate and vote on two proposals for early withdrawal of pensions on Monday, one by legislators and another by President Gabriel Boric, who is seeking to juggle inflation and populist demands.
Leftist legislators are proposing a 10% withdrawal but Boric and Finance Minister Mario Marcel have said it would worsen spiraling inflation. In March, Chile reported its highest monthly inflation rate - 1.9% - since 1993.
According to the government, Boric's plan represents a fifth of the money by limiting withdrawals to pay alimony, mortgages and other kinds of debt that won't cause inflationary pressure.
"Naturally, this is less damaging than a full pension withdrawal, but it increases disposable income and may have some impact on demand and inflation," a Bank of America report released last week said.
The debate is scheduled to start at 3 p.m. (1900 GMT) and expected to conclude late at night. Legislative rules require that the proposal to allow full withdrawal needs 93 of 155 votes to pass while Boric's proposal requires 78.
Chile's government has used early pension withdrawals to help citizen's deal with the economic fallout of the COVID-19 pandemic, approving three withdrawals of 10% since June 2020 and rejecting a fourth in December.
Boric's government opposed a new withdrawal, but submitted a last-minute limited proposal when a congressional committee was set to vote on another withdrawal.
"To move this forward we need to take care of the economy, because we need these reforms to settle in a scenario that allows them to be sustainable," government spokeswoman Camila Vallejo told reporters.
Boric supported the previous four withdrawals, but the government says that another 10% withdrawal would leave nearly half of workers, around 5.8 million people, without savings. Boric has proposed reforming the pension system and has announced a $3.7 billion economic recovery plan.
(Report by Natalia Ramos; Writing by Alexander Villegas; editing by Grant McCool)