Punjab Finance Department’s One-Year Performance Under Chief Minister Maryam Nawaz Sharif

Under the dynamic leadership of Chief Minister Punjab, Maryam Nawaz Sharif, the Punjab Finance Department has undertaken significant reforms over the past year, aiming to strengthen financial management, eliminate inefficiencies, and ensure fiscal sustainability.

The government’s strategic approach to public financial management has resulted in remarkable achievements, particularly in eliminating circular commodity debt, reforming the pension system, investing surplus funds, and establishing the Punjab Life Insurance Company.

Eliminating Circular Commodity Debt

One of the most pressing financial challenges faced by Punjab was the rapidly increasing circular commodity debt. By June 2022, this debt had escalated to Rs. 629 billion and was projected to reach Rs. 1,151 billion by June 2024, significantly burdening the provincial economy. The estimated mark-up expense alone for FY 2023-24 stood at around Rs. 200 billion.

Recognizing the severity of the issue, the Punjab government implemented a comprehensive overhaul of the commodity operations regime. Instead of allowing the debt to accumulate further, the government devised a structured repayment plan aimed at eliminating the outstanding obligations. As a result, the remaining debt stock has been brought down to Rs. 103 billion, marking a significant fiscal achievement.

Overhauling Punjab’s Pension Regime

The rising pension liability posed another major financial challenge for the province. In 2010-11, Punjab’s annual pension expenditure was Rs. 36 billion, which skyrocketed to Rs. 390 billion in 2023-24. Pension payments as a percentage of provincial revenue increased from 6.8% in 2010-11 to 13.1% in 2022-23, with projections indicating a further rise to 20% by 2029-30. The total pension liability up to 2023-24 had reached an alarming Rs. 11.9 trillion.

To tackle this unsustainable trend, the Punjab government introduced a series of pension reforms. A Defined Contribution Pension Scheme for new entrants has been introduced in January 2024, ensuring long-term fiscal relief.

Additionally, the Punjab Pension Act is being drafted to formalize and regulate the entire pension system. Furthermore, several parametric reforms have been carried out in legacy pension scheme. Key reforms include:

Reduction in Leave Preparatory to Retirement (LPR) to only the initial basic pay

Pensionable pay limited to basic salary, excluding allowances

Past ad hoc allowances declared inadmissible for future retirees

Commutation percentage reduced from 35% to 25%

Introduction of a discount factor for early retirement

Annual pension increases indexed at 50% of salary increases

Medical insurance replacing medical allowance

Restriction of family pension to spouses only

Pension calculation to be based on the average of the last three years’ salary

These reforms have significantly reduced Punjab’s accrued pension liability from Rs. 11.9 trillion to Rs. 5.7 trillion. The shift to the Defined Contribution Scheme alone is projected to save Rs. 2.7 trillion over 30 years. Additionally, the Defined Benefit Reforms will yield Rs. 58 billion in the first year and Rs. 2.9 trillion over the next decade. By deferring certain pension payments, the government has also secured a fiscal space of Rs. 100 billion until FY 2029-30.

Investment of Surplus Funds

Historically, Punjab’s surplus funds were not utilized optimally, resulting in missed opportunities for revenue generation. Under the new financial leadership, the government has transformed its approach by proactively investing idle funds in risk-free financial instruments such as government securities and T-bills.

The deployment of Rs. 200 billion in secured investments has not only generated additional revenue but also reinforced the financial stability of government entities. To support this initiative, the government has established a strong legal, regulatory, and policy framework that ensures transparency and efficiency in public fund management.

Establishment of Punjab Life Insurance Company (PLIC)

The Punjab Life Insurance Company (PLIC) has been established under the Finance Department to reduce reliance on external insurers, address significant financial outlays on life insurance premiums, and enhance the province’s ability to implement innovative social protection and welfare programs

Cost-Saving: PLIC will reduce premium rates by leveraging its public sector status. For instance, Punjab paid PKR 48 billion in life insurance premiums for Universal Health Insurance (UHI) in FY 2023-24 and PKR 1.52 billion for Group Life Insurance in FY 2022-23. These expenditures will now be retained within the province.

The establishment of PLIC marks a transformative step in enhancing financial sustainability, enabling social protection programs, and creating fiscal savings for the province.

Conclusion: A Year of Financial Excellence

Under the visionary leadership of Chief Minister Maryam Nawaz Sharif, Punjab has made unprecedented strides in public financial management. The elimination of circular commodity debt, landmark pension reforms, strategic investment of surplus funds, and the establishment of PLIC demonstrate the government’s commitment to fiscal discipline, economic stability, and social welfare.

These initiatives have not only resolved long-standing financial challenges but also laid the foundation for a stronger, more sustainable Punjab. The government’s progressive financial policies continue to enhance public trust, ensuring that Punjab moves towards greater economic prosperity and fiscal self-sufficiency in the years ahead.

Copyright Business Recorder, 2025