Government is deliberating raising retirement age in a bid to alleviate mounting pension expenses ahead of the annual budget and an impending visit by the International Monetary Fund (IMF), announced the country’s finance minister on Tuesday.
Finance Minister Muhammad Aurangzeb disclosed that an IMF delegation is expected to arrive in Pakistan within the next 10 days to discuss a potential new bailout program during a news briefing.
“Steps must be taken to bring pension costs under control,” the finance minister said, adding that pension payments were a “big liability”. The retirement age in Pakistan is 60. “Age is now just a number,” Aurangzeb added. “Sixty is the new 40.”
Law Minister Azam Nazeer Tarar revealed the formation of a committee tasked with proposing reforms aimed at overhauling the pension system.
The finance minister underscored the imperative to curb non-development expenditure, particularly in light of the burgeoning pension liabilities. The escalating growth in pension expenses, compounded by the unfunded nature of pension obligations, poses a mounting challenge for the government as it formulates its budget.
Read: IMF Likely to Demand Pension Reforms
For the fiscal year 2023-24, Pakistan has allocated 801 billion rupees ($2.88 billion) for superannuation allowances and pensions, representing a 31% increase from the previous fiscal year's budgeted amount of 609 billion rupees ($2.19 billion).
With Pakistan's financial year ending in June, the government, under Prime Minister Shehbaz Sharif's leadership, must present its budget for fiscal year 2025 before June 30.
The IMF, in a statement on Sunday, indicated that a mission is scheduled to visit Pakistan in May to deliberate on the FY25 budget, policies, and reforms as part of a potential new program aimed at enhancing the welfare of all citizens.