Macroeconomic framework discussed: Increase in pension expenditure irks NFC panel

A sub-group of National Finance Commission (NFC) has expressed serious concern over considerable increase in pension expenditure over the last five years and emphasised the need for addressing the issue on priority basis. Sources said that a meeting of the sub-group, chaired by finance secretary Punjab and attended by the members of NFC, was held to propose a macroeconomic framework to establish and develop the benchmarks for the receipts and expenditure. In order to achieve this, for an efficient and overarching policy framework, the macroeconomic goals of all the sectors of the federal and provincial governments are needed to be aligned.
The meeting underlined the need that the federal government should devise a holistic macroeconomic brainwork and once a defined macroeconomic framework is presented, the federal government as well as the provincial governments can then set their priorities for the next five years with focus on particular sectors.
The meeting also stressed on the need to define the expenses to be incurred over the next five years and once the expenditure is determined, it can then be in line with the revenue potential.
This approach will help reveal a realistic gap and explore alternate avenues with one of them as private sector in Public Private Partnership''s mode to meet the shortfall.
The meeting also "pressed the need to address the issue of ballooning pensions over the last five years and in order to decrease the gap between revenue generation and expenditure, the issue of exponential increase in the pensions is needed to be addressed on priority. There was a proposal that in future meetings, a sub-group from among the participants should work on these key areas alongside collective efforts by all the provinces and the federal government to ensure that tangible results are achieved.
The meeting pointed out the reasons for the shortfall which included low tax-to-GDP ratio, high debt servicing cost, rising circular debt, loss making public sector enterprises, rapidly increasing cost of public sector pensions, deficits in provision of key social services (health and education), growing youth bulge requiring robust and consistent economic growth for sufficient job creation in the medium-term, addressing issues of regional poverty and human development among others.