EDITORIAL: During the cabinet meeting on 18 August the Prime Minister reportedly stated that the issue of pensions is more serious than the issue of energy sector circular debt, adding that the government is paying 470 billion rupees on account of pensions - an amount equal to what the government pays as salaries to government employees. Two clarifications are in order: (i) the circular debt, the outcome of sector inefficiencies, is at present more than 2 trillion rupees with an additional 962 billion rupees added during the two years of the Pakistan Tehrik-i-Insaaf government (against the addition of 808 billion rupees during the five years of the PML-N government) while pension outlay is less than half the amount. This does not imply that pensions are not a serious issue for the country's economy just that the circular debt remains a major impediment to the country's economic health and its continued rise should be a source of great concern; and (ii) pensions include military and civilian pensions (369 billion rupees military and 111 billion rupees civilian budgeted for the current year) however the running of civilian government does not include the running of the military. In the section on Defense Affairs and Services in the budget document employees' related expenses are itemized at 475.6 billion rupees. In other words total running of civilian and military expenses are budgeted at 875.6 billion rupees for the current year.
Be that as it may, the pension issue is becoming a serious one. In 2015-16 the total budgeted pension allocation for military was 174.2 billion rupees and 56.7 billion rupees for civilians, in 2017-18 180 billion rupees was budgeted for military pensions (with revised estimates of 253 billion rupees) and 67.8 billion rupees for civilians revised upward to 80 billion rupees and last year pensions as per revised estimates to the military rose to 354.9 billion rupees while for civilians it was 108.4 billion rupees. Thus in four years (2015-16 to 2019-20) military pensions rose by 103 percent while civilian pensions rose by 91 percent.
The rise in pensions during the two years of the PTI administration is also a source of concern: from 259.7 billion rupees allocated for military in 2018-19 to 369 billion rupees in the current year and from 82 billion rupees for civilian pensions in 2018-19 to 111 billion rupees in the current year - or a rise of 42 percent in military pensions and a rise of 35 percent in civilian pensions.
Senior officials of the Ministry of Finance in an interaction with a select group of media personnel on condition of strict anonymity stated that the issue of pensions will be addressed through reforming the pension system; adding that the Accountant General of Pakistan Revenue has sought three months to computerize the entire civil pension system (with the assumption being that computerization would eliminate ghost pensioners) and discussions with the Accountant General of Military Accounts are underway who reportedly stated that a pilot project would be initiated in Kasur. While one would have to wait for the results yet acknowledging that a problem exists is the first step in dealing with an obvious issue while initiating a study on the why and the wherefores with appropriate recommendations is the second important step. Once these steps are completed the government can then begin to implement the recommendations to reform the system.
However, the government needs to focus on taking measures other than those targeted towards eliminating ghost pensioners and a more holistic approach for example the setting up a pensions fund allowed to maximize its returns instead of allocating pensions from the budget may be considered.
Copyright Business Recorder, 2020
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