Tuesday June 18, 2024

Experts for early pension reforms to reduce fiscal burden

By Rasheed Khalid
December 26, 2021

Islamabad : Safeer Ahmed, Special Secretary, Ministry of Finance, Government of Khyber-Pakhtunkhwa has said that his province is the first to digitise the pension payment system and remove the tiers that were not genuine.

Mr. Safeer said this during a meeting on “Reform of pensions: lessons from successful Examples in Pakistan and beyond,” organised by Sustainable Development Policy Institute (SDPI) in collaboration with Sustainable Energy and Economic Development (SEED).

Dr Omer Mukhtar, Team Leader, SEED, informed the participants that Khyber-Pakhtunkhwa province has 170,000 pensioners which made around 25% of their active workforce. The provincial government allocated more than 90 billion for pension expenditures in the current year. The most worrisome aspect of it is that these expenditures are growing at 14% while provincial receipts are growing at 8%. Keeping this trajectory in view, he said, the government will have very little resources to meet other expenses in the coming years.

Rukhsana Asghar, Member, Federal Pay, and Pension Commission, asserted that the real challenge for us is to figure out the long-term solutions and get a strong legal framework to address the pension liabilities. Therefore, a dialogue is required with all stakeholders to get them on board to implement the pension reforms, she suggested.

Dr. Vaqar Ahmed, Joint Executive Director, SDPI, stressed that the rapidly increasing pension liabilities are becoming a financial burden for the country. This trend is bound to squeeze the space available for development spending, he opined. The SEED and SDPI’s efforts are aimed at supporting KPK Government in this reform process by reviewing successful examples of contributory pension schemes and transition from a defined benefits scheme to more fiscally sustainable models, he added.

Usama Bakhtiar, Technical Advisor, SEED, was of the view that with the current growth rates, pension and salaries payments will surpass provincial total receipts, possibly as early as 2027. He suggested five key policy lessons including evidence-based mapping of stakeholders, the government may match or exceed employee shares, diversification across asset classes tends to yield better performance, risk-based supervision to examine and forecast different types of risks and independent, empowered, and well-resourced regulation.

Pension strategist Brig (r) Muhammad Ashraf was of the view the pension funds in the world are the pivot of national economies but in Pakistan this ratio is lowest which is less than 1%.