Pakistan’s budget documents rarely make for gripping reading, but one number stands out in stark relief: more than one trillion rupees will be spent on pensions this year. A decade ago, the figure was a fraction of that. Today, pensions are on course to become one of the largest drains on the federal purse, rivaling even development spending. The promise of lifelong benefits to every civil servant and soldier who retires has swelled into a fiscal liability too heavy to sustain.
This summer, under pressure from international lenders and confronted by its own arithmetic, the government has begun to rewrite the rules. The newly notified Federal Government Defined Contribution Pension Fund Scheme will replace the traditional system for fresh entrants. Instead of an open-ended commitment by the state, pensions will now be tied to actual contributions from both employee and employer. New civil servants will put aside ten percent of their pensionable pay, matched by a twelve percent contribution from the exchequer. Over time, their retirement security will depend not on unfunded promises but on the balance that accrues in their pension accounts.
For existing employees, nothing changes. Their defined benefits remain intact. The reform is prospective only, designed to slow the growth of future liabilities. In reality, this is less a solution than a damage-control strategy. Pension bills have been rising at nearly thirty percent over two years, and much of this is driven by the armed forces. Military pensions alone are projected to reach 742 billion rupees in 2025–26, up by almost one third from just two years ago. Civilian pensions, though smaller, add another 243 billion rupees to the tally. The content in this publication is expensive to produce. But unlike other journalistic outfits, business publications have to cover the very organizations that directly give them advertisements. Hence, this large source of revenue, which is the lifeblood of other media houses, is severely compromised on account of Profit’s no-compromise policy when it comes to our reporting. No wonder, Profit has lost multiple ad deals, worth tens of millions of rupees, due to stories that held big businesses to account. Hence, for our work to continue unfettered, it must be supported by discerning readers who know the value of quality business journalism, not just for the economy but for the society as a whole.To read the full article, subscribe and support independent business journalism in Pakistan
