EDITORIAL: Just days after it was revealed that the federal government pays trillions of rupees in pays and pensions every year, mostly to the unproductive civil service, it is now being reported that the finance ministry has proposed drastic changes to pension structures for retired public sector employees in a summary forwarded to the prime minister. Defence and armed forces personnel have been exempted, as usual, but the exercise is clearly meant to cut excess expenditure wherever possible.
Pensions will now be calculated on the basis of the last three years’ drawn salary against the existing formula of granting it on the last drawn pay. Future pensions are proposed to be indexed with (CPI) consumer price index (80 percent of the last three years) with a maximum 10 percent increase per annum. Multiple pensions will no longer be allowed and in case of overlap, there will be the option to select the highest one and surrender the rest. Also, importantly, retired personnel with fresh public sector employment will be able to keep either the new salary or the pension.
These, and a host of other pension reforms, have been proposed but not yet notified. In fact, it has been reported that the summary was forwarded to the PM office during the time of the previous PDM (Pakistan Democratic Movement) government. The fact that it is still lying there indicates that there might have been some pushback from certain quarters unwilling to give up their perks and privileges. Or that the administration of the time simply decided against rattling retired public servants in its last days in office.
Yet not only should such proposals have come much sooner but, considering the financial crunch that has finally got the finance ministry to think proactively, they need to be pushed through urgently. Already, less than half way through the current fiscal year, the government is already constrained to cut development funding to make up for shortfalls elsewhere. It makes sense to begin cost cutting with the bloated public sector, which has been blessing itself with all sorts of pay and pension privileges for the longest time; not to mention all the perks that are not shown in their books.
The finance ministry no doubt understands the severity of the ongoing financial crunch better than all other government departments. The country came, and remains, perilously close to sovereign default. And, the IMF (International Monetary Fund) programme that is designed to keep it above water mandates structural reforms that must remove all unnecessary expenditure. It’s no secret that the public sector carries a lot of dead weight, duly facilitated by the government. Now the time has come to sort it out.
It remains to be seen, though, what response this and other such moves elicit from within the service. Usually, it is the bureaucratic structure itself that promptly sabotages any and all reforms that might sanitise pay and pension payments. That, in part, is why civil service reforms have never taken off, no matter how sincerely any administration has tried to carry them out.
The pension reforms summary needs to be notified immediately so the finance ministry can move on to the next set of badly needed reforms. It must not, as is the norm, be consigned to archives to gather dust in the PM’s office.
Copyright Business Recorder, 2023