Pension reforms introduced by the government of Punjab will play a unique role in reducing financial burden on the province, remarked Punjab Finance Minister Hashim Jawan Bakht.
Elaborating on the reforms in a statement on Thursday, he said that given the current growth rate of pension and salary payments, the government of Punjab would run out of finances in the near future, which would impact development expenditure in the province. “If pension expenditure continues to grow unchecked, it will limit the fiscal space available for development schemes,” he added.
Punjab has begun implementation of pension reforms under which early retirement from government service has been disallowed before the age of 55 years or before the completion of 25 years of service.
Pension reforms are aimed at curtailing pension-related liabilities, which are emerging as a fiscal risk to the province.
The province has introduced pension reforms by amending Punjab Civil Servants Act 1974, while keeping in view the significance and future financial implications of pension payments.
The decision to impose curbs on early retirement, without affecting pension entitlements, was taken while considering the soaring number of government employees who sought to retire early every year.
In the past three years, approximately 60% of the total annual retirements in Punjab were early retirements.
“The net impact of this decision on cash flow of the province will be more than Rs85 billion over the next three years,” the statement said.
“This amount is expected to provide ample fiscal space to the government of Punjab for planning appropriate welfare and development projects throughout the province.”
Commenting on the reform initiatives, Punjab Finance Secretary Iftikhar Ali Sahoo said that pension reforms would enable the provincial government to keep skilled and experienced staff for a longer period and help save government resources.
“Pension reforms are a step in the right direction to streamline a fragmented system which places government employees under various categories causing some of them to retire much earlier than others,” he added.
Published in The Express Tribune, November 5th, 2021.
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