ISLAMABAD: The federal government has prepared a plan to borrow a further $500 million from the Asian Development Bank (ADB) to support pension reforms. The loan is equivalent to Rs138.48 billion.
The initiative has been named the Transforming Public Sector Pension Program. The program loan will run for three years, from November 1, 2026, to November 2029. The ADB will also provide Rs159.2 million in technical assistance for the proposed program.
The loan will be linked to the outcomes of the reforms. The annual pension bill of the federal government has reached Rs1,169 billion. According to the Ministry of Finance, the current pension system has become a major financial burden on the national treasury.
Retired government employees are paid pensions from the annual budget each year, and pension spending and long-term liabilities continue to rise. This is reducing the space for funding health, education and infrastructure projects.
Since 2024, a contributory pension scheme has been introduced for new recruits, and reforms have been made to the old defined-benefit scheme.
Running the reforms and establishing the new scheme require institutional changes, which in turn call for administrative and financial measures. Pakistan has previously borrowed from the ADB and the World Bank for pension reforms.
