ISLAMABAD: Pakistan’s federal government on Tuesday announced major pension reforms in the Budget for the Fiscal Year 2025–26, aimed at easing the growing fiscal burden on the national exchequer and improving the sustainability of the pension system.
“Over the past several decades, changes made to the pension scheme through executive orders had significantly increased pressure on the state treasury. To address this issue, the government had introduced essential reforms,” Finance Minister Muhammad Aurangzeb said while presenting budget proposals in the National Assembly.
He added that early retirement would be discouraged, said under the new measures, and pension increases would be linked to the Consumer Price Index (CPI).
The minister said that after the death of a spouse, the duration of family pension payments would be restricted to ten years. In addition, the practice of receiving multiple pensions had been abolished.
He noted that, after retirement, individuals rejoining government service would have to choose between receiving a salary or a pension, but not both.
FBR reforms
The minister, in his speech, pointed out reforms in the Federal Board of Revenue (FBR), saying that Pakistan’s tax-to-GDP ratio was only 10%. “It was imperative to increase the ratio to 14%,” he said, adding that achieving the national targets was “impossible without the FBR’s transformation.”
Earlier, Finance Minister Muhammad Aurangzeb unveiled the federal budget for the fiscal year 2025–26, with a total outlay of PKR 17.573 trillion, down 7% as compared to the PKR 18.9 trillion budgeted outlay of FY25.
The Finance Minister said the IMF has shown trust in the reforms undertaken by the incumbent government and those claiming about the minibudget have turned silent now.
