ISLAMABAD: Minister for Finance and Revenue, Senator Muhammad Aurangzeb on Tuesday reaffirmed the government’s resolve to ensure structural reforms to achieve long-term economic growth and stability.
Addressing the “National workshop on transitioning to define contribution pension schemes”, which was organized by the Security and Exchange Commission of Pakistan (SECP), the minister said that the government was committed to reform the areas of taxation, energy and state-owned enterprises (SOEs).
He emphasized that a major reformative initiative introduced this year pertains to the country’s tariff structure, aiming to transform Pakistan into a more competitive economy. This includes gradually dismantling the wall of protection that has long hindered industrial growth.
The minister noted that these steps would help domestic industries advance and enable the export sector to become more robust and globally competitive.
The government has also taken several measures to addressed public finance issues, particularly to reduce debt servicing, not just through the expected decline in the policy rate, but also through broader fiscal measures, he remarked.
He also emphasized the importance of liability management in creating fiscal space. “Whatever we do in terms of liability management will help us secure funding for additional sectors that require focused investment as we move forward. This will be critical in creating the fiscal headroom necessary for sustained development,” the minister added.
Senator Aurangzeb underscored the importance of pension reform as a key component of the government’s broader fiscal strategy and recalled that the government had taken a significant step in this direction last year.
“As of July 1, 2024, we announced that all new entrants to the federal government and civil service will move to a defined contribution scheme,” he said, adding, that this was a necessary move before even beginning to address the legacy issue of unfunded liabilities.
The minister stressed the need to stop the fiscal bleeding and said that this year’s budget the pension bill alone has crossed one trillion rupees.
He said that pension reform was not only a matter of fiscal responsibility but also essential for ensuring long-term macroeconomic sustainability and ensuring predictability in government finances and managing costs effectively.
He further highlighted that the shift from a defined benefit to a defined contribution pension model also has significant implications at the individual level. “This transition isn’t just a fiscal adjustment, it’s about empowering employees to take ownership of their retirement savings,” he added.
Finance Minister said that government in Federal Budget for the Fiscal Year 2025-26, has proposed a 7% increase in pensions, which he said, was aligned with prevailing inflation trends to protect their purchasing power. The government has recommended a progressive taxation measure. “From an equity standpoint, we have proposed a 5% tax on annual pension income exceeding Rs10 million, which has been submitted to Parliament for approval.
The minister said these steps reflect a balanced approach, providing relief to pensioners while also ensuring that high-income recipients contribute fairly to national resources. He stressed the need to learn form the experiences and expertise of the provincial governments to adopt uniform strategy.
Commenting on the prevailing geopolitical tensions and regional developments, Finance Minister said that a detailed meeting was held with all relevant stakeholders a day earlier to assess the situation.
“We need to ensure that we maintain adequate strategic reserves, have a clear understanding of pricing trends across asset classes, and remain fully prepared for any eventuality,” he stated.
The minister reaffirmed the government’s commitment to proactive risk management in the face of external uncertainties to safeguard economic and financial stability.
Regarding the ongoing discussions on tariffs with US, the minister said that it was progressing positively, reflecting growing alignment between Pakistan and the United States. He said that ongoing negotiations on tariffs a very constructive and encouraging discussion was held with the US. Secretary of Commerce.
He said that the both the countries were moving in the right direction to ensure that Pakistan is well-positioned competitively with regard to US tariffs and the broader strategic partnership between both the countries continue to strengthen, opening avenues for deeper economic cooperation and mutual growth.
