Fiscally Sustainable Pensions in Pakistan Volume 28, Issue 2

Abstract

Public sector employment remains attractive for important reasons such as job security and a guaranteed pension. Evaluating alternate pension systems has gained importance among policymakers concerned about the aging population and rising poverty levels. Pakistan has a Pay-As-You-Go type pension system, financed by taxpayers’ money, and has resulted in the building up of unfunded liability for the government. The expenditures on superannuation are gradually coming into mainstream discussions on fiscal sustainability and public finance management. These additional expenditure liabilities require an increase in future taxes to be solvent. We use scenario-based projections to highlight how the existing pension system is fiscally unsustainable and what approaches are needed to make it sustainable.