Pakistan’s Finance Minister, Muhammad Aurangzeb, announced on Wednesday that the government will introduce major changes to the public sector pension system. Starting from the next fiscal year, newly hired government employees will no longer be eligible for state-funded pensions. Instead, they will contribute a part of their monthly salary to their own pension fund.
This change aims to ease government spending, as the current pension costs range from Rs800 billion to Rs1 trillion yearly, which is about 1% of Pakistan’s GDP.
Speaking at “The Future Summit – What Matters Now,” Aurangzeb shared an optimistic forecast for remittances, predicting a 12% increase. He expects overseas Pakistanis to send back $34 billion in FY 2024-25, up from $30.25 billion last year. Aurangzeb urged the private sector to lead economic growth, moving away from reliance on government-driven development.
He also discussed the challenge of paying pensions to current retirees and employees hired before July 2025, calling it a “stock issue.” Despite these challenges, he expressed hope for improved credit ratings from agencies like Moody’s, Fitch, and S&P this fiscal year.
Aurangzeb noted a recent drop in the six-month Kibor rate, used as a lending benchmark, following the State Bank’s recent interest rate cut. He suggested further rate cuts could help economic growth.
He also stressed the need for a comprehensive approach to Pakistan’s population growth, including better health, nutrition, education, and family planning. Lastly, UAE Consul General Dr. Bakheet Al Rumaithi pledged continued support for Pakistan’s economy, and Dr. Reza Baqir emphasized the need to tackle recurring fiscal and trade deficits.
