Pension reforms

According to reports, after a long delay, the government has approved Concept Clearance Paper for Pension Reform Project. The reforms are to be executed with a $75 million loan from the World Bank. It is alarming that the pension bill for the government of Pakistan has been surging and now it is planning to introduce a new contributory pension system. The government is likely to introduce this system once the Pay and Pension Commission (PPC) prepares its final report by October 2020; after the submission of the report it is likely to be implemented in the next financial year. It is interesting that the finance ministry submitted its Concept Clearance Paper to the Planning Commission even before the report is finalized. The Central Development Working Party (CDWP) of the Planning Commission is seeking approval for a $75 million loan from the World Bank.

There are a couple of questions here that need explanation. One, there have already been numerous proposals developed and presented by various committees and even technical assistance (TA) given by donor experts in the past 20 years or so. First the ADB loan in 2002 focused on strengthening pension, insurance, and the savings system. With the support of that TA loan, the government announced the transformation of the Central Directorate of National Savings (CDNS) into a commercial entity in 2004. Then in 2008 and again in 2010, the Pakistan Institute of Development Economics (PIDE) developed two comprehensive documents on pension systems reform and presented some useful recommendations in both. In 2016, the then federal ombudsman formed a 12-member committee which presented a nearly 100-page report on pension reforms. That was a very good report prepared by senior auditors, bureaucrats, economic and finance experts.

Now again a new exercise is being undertaken and that too entails 75 million dollars in loan. In the presence of so many documents already completed at various times, why is there a need for a new study and that too involving huge loans? Donors are notorious for offering loans for studies of various kinds even if there is no concrete need for them. It is for our government not to accept such offers because adding to our loans is never a good idea unless it is absolutely necessary. The government would do better to utilize the recommendations already offered in the reports and studies mentioned above.