The federal government has finally notified another pension reform that requires retired public servants rehired by it to either draw a salary during the period of their re-employment or retain their pension. The reform also forbids all former federal employees from receiving multiple pensions. The measure is part of the pension reforms announced in the past couple of years to curb the burgeoning federal pension bill, which has crossed Rs1tr, including military pension costs of Rs662bn, for the current fiscal year. The pension liabilities are the fourth largest federal expenditure, growing by about 24pc per annum in recent years. The reforms are a key requirement of the ongoing IMF programme and are expected to address long-standing inefficiencies in the system, and relieve the pressures on our strained finances. For an economy burdened by unsustainable debt and that has little to spend on socioeconomic development, the pension reforms are a step in the right direction.

That said, the success of these reforms in reducing the burden on the national budget will largely depend on their being applied uniformly to both civilian and military retirees. While most reforms — such as the discontinuation of multiple pensions, reduction in the basis for calculation of future increases, etc — notified so far apply to both categories, reports suggest a delay in the implementation of the contributory pension scheme for military personnel. One of the most important decisions of the pension reforms, the scheme will be key to slashing future pension liabilities. However, pension reforms on their own are not going to solve our fiscal problems. The government also needs to look at reforming and cutting the size of, arguably, one of the world’s most unwieldy bureaucracies. Without doing so, economic recovery will face obstacles. This is important not just for reducing financial costs but also for introducing efficiency into the affairs of the state and curbing the latter’s interventions in the economy.

Published in Dawn, April 29th, 2025