No State Pension for New Employees Starting Next Fiscal Year

Finance Minister Muhammad Aurangzeb has unveiled a pivotal reform in Pakistan’s pension system: public sector employees hired from the next fiscal year will no longer receive state-funded pensions. Instead, they will contribute to self-funded pension schemes.

Key Highlights of the New Pension Scheme

• Self-Funded Pensions: Employees will contribute a portion of their monthly salaries to build their pension funds.
• Reduced Government Expenditure: This reform aims to alleviate the burden of the federal pension bill, currently at Rs800 billion to Rs1 trillion annually, which accounts for 1% of GDP.

Economic Growth and Stability

Aurangzeb outlined other initiatives to strengthen the economy:

• Workers’ Remittances: A projected 12% growth, with overseas Pakistanis expected to remit $34 billion in FY2024-25.
• Private Sector-Led Growth: Emphasis on reducing government involvement, particularly in sectors better suited for private investment.
• Improved Credit Rating: Pakistan anticipates an upgrade to the single 'B' category, reflecting enhanced macroeconomic stability.

Challenges

Despite these positive developments, the population growth rate of 2.55% remains a pressing concern, posing long-term challenges to sustainable economic growth.