ADB calls Pakistan’s government pension scheme “attractive” but financially unsustainable

The Asian Development Bank (ADB) has raised concerns about Pakistan’s government employees’ pension scheme, describing it as “attractive” but financially unsustainable due to the absence of a proper funding mechanism. 

The ADB stated in its latest report that while the pension scheme offers generous benefits to retirees, it places a significant strain on the national budget.

The report highlighted that the lack of a structured funding plan for the pension scheme makes it a major drain on public finances. The ADB emphasised the need for reform, suggesting that Pakistan should expand the scope of the Employees’ Old-Age Benefits Institution to establish a more sustainable, contributory system.

In addition, the ADB called for significant improvements to Pakistan’s insurance sector, which it described as underdeveloped. The report stressed the importance of a robust insurance industry in providing financial protection against natural disasters and supporting private sector growth. 

It recommended that the government promote social insurance programs, especially those targeting the poor, and enhance the regulatory framework for insurance companies to foster long-term economic stability.