EOBI projected deficit

EDITORIAL: A Business Recorder exclusive in a briefing by the Employees Old Age Benefits Institution (EOBI) to Economic Coordination Committee of the Cabinet chaired by the Finance Minister, the highest economic decision-making body in the country, projected a deficit of 237 billion rupees in another ten years (2036-37) unless mitigating measures are promptly taken notably to increase the contribution collections or investment returns.

EOBI is administered by the Ministries of Overseas Pakistanis and Human Resource Development and its Board is chaired by the Secretary with 14 members, including two representatives from the Federal Ministry, Labour Secretaries of all four provinces, four representatives of employers – one from each province and four representatives from employees, one each from each province. EOBI is tasked to identify and register establishments and industries (which by definition do not include those operating in the parallel informal sector estimated at around 50 percent), identification and registration of insured individuals, collection of contributions, EOBI fund management, and provision of benefits as per the law. The contributions are as follows: employers contribute 5 percent of the minimum wage while employees contribute one percent of the minimum wage or a total contribution of 6 percent of the minimum wage per month. In this context it is relevant to note that the federal government exercises its prerogative to raise the minimum wage (that in turn leads to an increase in contributions) and pension.

The briefing noted that EOBI contributions receipts have risen from 39 billion rupees in 2023-24 to 80 billion in 2024-25, a rise of 10.22 percent each year, but so did pensions accounting for 51 billion rupees in 2022-23 and 59.5 billion rupees in 2024-25 (a rise that would outpace contributions). Investment income of the EOBI fund increased from 57 billion rupees in 2022-23 to 68.584 billion rupees in 2023-24 to 77.6 billion rupees in 2024-25. While the available data suggests a rise in contributions and investment greater than the rise in pensions yet, according to the twelfth actuarial valuation report of EOBI’s assets and liabilities, EOBI fund balance will peak at 629.4 billion rupees by 2028-29 and thence begin to decline.

It is, however, extremely disturbing to note that during the discussion in the ECC, stakeholders pointed out discrepancies in the communication of facts relating to investment returns, pensions and contributions during the last two years, which, no doubt, may well challenge the validity of the results of the actuarial report.

The ECC while approving the EOBI budget estimates for 2025-26 and revised estimates for 2024-25 emphasized that EOBI must ensure availability of funds to perform its core functions. While this is good advice yet what must be borne in mind is the propensity of administrations to budget an increase in minimum wage and pensions every year - for political as opposed to economic considerations - that has compromised the financial viability of many a state-run fund and institution. And, typically, has dealt with the resulting shortfall by releasing funds from the treasury at the taxpayers’ expense, thereby fuelling the budget deficit that has negative implication on inflation.

To conclude, one must appreciate the fact that the EOBI management has raised a red flag well in time and one would hope that appropriate mitigating measures are considered in subsequent budgets – national as well as EOBI’s.

Copyright Business Recorder, 2026