Pakistan Implements Pension Reforms Amid Fiscal Constraints

Pakistan's government has banned double pensions and revised pension calculations to comply with IMF and World Bank requirements. Pension benefits will now be based on average earnings in the 24 months before retirement, addressing rising liabilities and ensuring more sustainable pension planning.

In a bid to align with fiscal constraints set by the International Monetary Fund (IMF) and World Bank, Pakistan's government has initiated a pivotal reform by prohibiting double pensions from the national treasury. This decisive step aims to manage the country's burgeoning pension liabilities.

Under the new directive, pension benefits will be determined by the average earnings of the 24 months leading up to an employee's retirement, rather than being based on the last 30 years' salary, as was previously the case. This change reflects a significant shift in the pension calculation methodology, designed to contain rising future obligations.

A senior official expressed the urgent need for these reforms, revealing that the combined pension liabilities for Pakistan's Centre and provinces could range between PKR 40 to 45 trillion. To address this, new rules stipulate that eligible individuals can only select one pension. Meanwhile, the net pension at retirement will be reviewed every three years as the baseline for any future increases.

(With inputs from agencies.)