The “double pension” scheme in Pakistan has been a subject of contention for years, primarily due to its financial implications and fairness, especially when viewed under the lens of economic reforms urged by international organizations like the International Monetary Fund (IMF). This scheme allows both civilian and military retirees to draw pensions from multiple sources, which has placed a considerable strain on Pakistan’s fiscal health. The IMF, in particular, has been vocal about the need for reforms to address inefficiencies and potential inequalities in this system, urging Pakistan to take steps toward a more sustainable and equitable approach.
In Pakistan, pension expenditure is a significant part of government spending, and it has been steadily increasing. The total pension liabilities of the federal government alone amount to approximately Rs 1.6 trillion (about 2.5% of GDP) annually, with a large portion allocated to double pension payments. A significant concern is the disparity in pension amounts received by military versus civilian retirees. According to the Finance Ministry’s 2023-24 report, Pakistan allocated Rs 750 billion for pension payments that year, out of which Rs 220 billion was directed toward defense pensions alone, accounting for nearly 30% of total pension expenditure. This allocation has increased by an average of 5% per year over the last decade, making it one of the fastest-growing public expenditures in the country. Experts argue that this growing fiscal burden is unsustainable, particularly as the country faces an economic crisis and attempts to negotiate a bailout package with the IMF.
Military personnel, both officers and soldiers, have long been entitled to special pension benefits that not only include their military pensions but also allow them to receive pensions from other government sectors, often resulting in double pensions. For instance, senior military officers who retire from the armed forces often take up lucrative civilian positions in state-owned enterprises or government ministries, drawing both military pensions and civilian salaries. In certain cases, they are eligible for multiple pensions if they served in various civilian departments during their careers. This provision has resulted in substantial double pension payments, with some retired senior officers collecting over Rs 300,000 monthly from these combined sources. A study by the Pakistan Institute of Development Economics (PIDE) in 2023 revealed that the double pension scheme for military retirees has added approximately Rs 100 billion annually to the country’s pension expenditure, disproportionately benefitting a small but influential group of individuals.
While the civilian sector also has provisions for retirees to claim pensions from different government agencies, the extent of double pensions in this sector is comparatively lower than in the military. Civil servants may receive pensions from multiple government departments if they have worked in various capacities over the years. However, even these combined pension payments add to the financial burden. According to official data, civilian pensioners received an average of Rs 50,000-70,000 per month in 2023, which rises when multiple pensions from various departments are included.
The IMF has been consistently critical of this system, especially in the context of Pakistan’s ongoing economic challenges. The institution, which has often been engaged with Pakistan for financial assistance, has stressed the need for pension reforms to ease fiscal pressure. According to the IMF’s 2024 report, the pension liabilities in Pakistan have been growing at an unsustainable rate, with pension payments now consuming a significant share of government revenues. As a result, Pakistan’s total pension expenditure has surged in recent years, further hindering the country’s ability to address its debt issues and invest in critical sectors like infrastructure and social welfare. The IMF’s recommendations for reforming the double pension system are aimed at reducing the overall pension burden, ensuring that pensions are distributed more equitably, and aligning the pension system with international best practices.
One of the key recommendations is the introduction of a more streamlined and transparent pension structure that limits the ability of retirees to claim multiple pensions from different government sources. The IMF has also proposed establishing a central pension fund that would centralize pension payments, making the process more efficient and reducing the chances of abuse. Another significant proposal is the review and adjustment of the eligibility criteria for the double pension scheme, particularly for military retirees, to ensure that pensions are not paid to individuals who are already financially secure due to their post-retirement employment or assets. The IMF has also emphasized the need to introduce a means-testing mechanism to assess the financial need of pensioners, rather than paying out pensions indiscriminately.
Several economists and industry experts have weighed in on the issue, with many agreeing that reforms are necessary to prevent the pension system from becoming an increasingly untenable burden on the government. Qaiser Bangali, a renowned economist and public policy expert, has been particularly outspoken on the matter. Bangali believes that the double pension scheme, especially for military personnel, is a key factor in the growing fiscal deficit. “In a country where the poverty rate is estimated at over 35%, it is unethical to continue such lavish pension payments to a select group of individuals, particularly when the majority of the population is struggling to survive. The system, as it stands, is both financially and morally unsustainable,” Bangali stated in an interview with a local economic forum in Islamabad.
Bangali’s statements reflect a growing sentiment among economic experts that the pension system needs to be overhauled to ensure fairness. He also echoed the IMF’s call for a more equitable distribution of pension resources. According to him, the government must consider more progressive methods of pension allocation that are based on individual needs, rather than automatic entitlement. “Reforms must ensure that pensions are paid based on public service rendered, and not based on the political clout of the retirees. We need to move away from a system that rewards those who can hold multiple positions and pensions after retirement,” Bangali added.
Dr. Ayesha Siddiqa, a prominent economist and defense analyst, has pointed out that the double pension system, particularly for military officers, creates an inequitable financial structure that disproportionately benefits certain groups at the expense of others. In an interview with a leading Pakistani news outlet, she noted that while the country’s military has historically been central to national defense, the practice of providing them with multiple pensions is no longer justifiable, given the state of Pakistan’s economy. “The state is facing serious fiscal constraints, and continuing to pay multiple pensions to military officers, who often take up multiple lucrative civilian positions, is not a viable policy,” Siddiqa remarked.
Siddiqa further stated, “In an economy where millions of people struggle to make ends meet, the double pension system for the military, which often extends to retired officers drawing hefty pensions, adds fuel to the fiscal fire. This situation is further complicated when we consider the fact that many of these officers hold significant positions in state-owned enterprises, which offer them lucrative salaries and benefits on top of their pensions.” Siddiqa’s comments underscore the perception that the double pension scheme not only strains the economy but also perpetuates inequality by favoring those in powerful positions.
On the other hand, former Secretary of Finance, Dr. Waqar Masood, has suggested that while reforms are necessary, there needs to be a careful balancing act. In his view, a full-scale abolition of the double pension system might not be practical in the short term, particularly given the benefits it provides to those who have served the state for decades. However, Masood also agrees with the IMF’s stance that the scheme should be more tightly regulated, with proper checks and balances in place to ensure that it is not exploited.
The financial implications of double pensions are staggering. According to the Finance Ministry’s 2023 report, Pakistan’s pension liabilities have grown by 5 percent annually over the last decade. In the fiscal year 2023-24 alone, the government allocated Rs 750 billion for pension payments, a portion of which went toward covering the costs of double pensions. Defense pensioners account for approximately 30 percent of total pension expenditure, despite the military’s relatively small share of the overall public service workforce. This imbalance has led to calls for systemic changes, as the government is increasingly finding it difficult to honor pension commitments while addressing other pressing financial needs.
In the face of growing public debt and fiscal constraints, the government has no choice but to consider radical reforms to the pension system. One suggested approach is the implementation of a unified pension scheme that would ensure that all retirees—whether from the military or civilian sectors—receive equal treatment based on their length of service, with clear guidelines on eligibility for multiple pensions. This would not only reduce the burden on the treasury but also promote fairness and transparency in the pension system.
Furthermore, the government has been exploring options to introduce a pension contribution model, in which employees contribute a percentage of their salary toward their pension during their working years. This approach has been successfully implemented in many countries and could provide Pakistan with a more sustainable solution to its pension crisis, allowing for the gradual phasing out of double pensions.
The road to reform is, however, fraught with challenges. The political will to take on the military establishment, which holds significant influence in Pakistan, will be critical in determining the success of any reform plan. Additionally, the process of transitioning from the current system to a more equitable one would require careful planning, consultations with stakeholders, and time to ensure that the changes do not adversely affect retirees who depend on these pensions for their livelihood.
In conclusion, the double pension scheme in Pakistan remains a deeply entrenched but unsustainable part of the country’s public sector benefits. The IMF’s recommendations for reforming this system aim to reduce the fiscal burden while promoting equity in pension distribution. As the government faces mounting pressure to rein in pension liabilities, it must carefully navigate the competing interests of the civilian bureaucracy, military establishment, and the broader public to implement reforms that are fair, transparent, and financially sustainable for Pakistan’s future.
The views expressed in this article are the author’s own and do not necessarily reflect Coverpage’s editorial stance.
