In the late 2010s, many developing countries were on the path to growth and prosperity. But the beginning of the 2020s undid all the progress made by those countries, leaving them in more distress....
In the late 2010s, many developing countries were on the path to growth and prosperity. But the beginning of the 2020s undid all the progress made by those countries, leaving them in more distress. The Covid-19 pandemic started a precipitous fall of economies around the world, pushing hundreds of thousands of people below the poverty line, creating food insecurity, and widening the wealth inequality gaps in societies across the world. A recent International Labour Organization (ILO) report has highlighted how a series of crises has made it worse for low-income and lower-middle-income countries. The ILO suggests that a robust pension system would help the countries increase their GDP per capita by 14.8 per cent in 10 years and reduce extreme poverty by six percentage points. This suggestion is critical for Pakistan, which is all set to announce its Budget 2023-24 on June 9.
In Pakistan, those employed in higher positions – and who usually belong to the country’s elite class – enjoy a good amount of monthly pension, adding more burden on the state’s scant financial resources. But people from poor or lower-middle-income households hardly get any such opportunities. Social protection plans in this part of the world are seen as a government’s way of duping people into voting for them for an extra term and are seldom seen as the initiatives needed to uplift the needy. Public-sector organizations have a smooth pension mechanism, and older people who have retired from these institutions get some amount every month. But there are some issues: most people who retired several decades ago are still receiving the amount calculated on the basis of the paltry salaries they earned many years back.
Pakistan’s labour force is mostly employed in the private sector which is notorious for not offering any incentives to employees. Most companies hire people on a contractual basis, which means they are not entitled to post-retirement benefits. A few, however, offer a provident fund. But since there are no fixed-term deposits for people, they end up without money as soon as they are out of job. With ‘retirement age’ hardly a factor in the country, people take up menial jobs post their official retirements only to have some form of steady income to run their households. The country cannot keep running like this, especially at a time when there are lingering threats of default. Employers that maintain provident funds should invest money in productive ventures so that people can benefit. Organizations like the Employees’ Old-Age Benefits Institution must be expanded, and more workers should be included. The finance division has to sit together with representatives from the private sector to figure out a way to set up pension funds for people. It is also important to educate people about the available Islamic financial products in the market to convince them to take the route of savings.