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Aurangzeb reveals pension reforms ahead of new IMF deal


Finance Minister Muhammad Aurangzeb

WEB DESK: In an effort to implement structural changes ahead of a new deal with the International Monetary Fund (IMF), Federal Minister for Finance and Revenue, Muhammad Aurangzeb, has announced plans for comprehensive pension reforms.

Speaking at a press briefing on Tuesday alongside Federal Law Minister Azam Nazir Tarar and Information Minister Atta Tarar, Aurangzeb stressed the need to control pension-related expenses.

Aurangzeb highlighted that the current retirement age might need to be extended, indicating that the government could raise it from 60 to 65.

Drawing from his experience as CEO of Habib Bank Limited (HBL), he said, “60 is the new 40.

The institution I left before coming here raised the retirement age to 65 because those are your productive years.” He added that changes in the service structure are crucial to reducing pension expenditure.

The government’s fiscal year 2023-24 budget for superannuation allowances and pensions stands at Rs801 billion, a significant 31 per cent increase from the Rs609 billion allocated in the previous year.

To address the growing burden, Federal Law Minister Azam Nazir Tarar stated that pension reforms would require new legislation, covering civil servants, armed forces, judicial organs, and executive organs.

He announced that a committee has been formed under the finance minister’s chairmanship to propose recommendations, which will be shared with the public once finalised.

Aurangzeb also touched on other critical economic matters, indicating that the upcoming IMF mission to Pakistan would focus on discussions regarding a new Extended Fund Facility (EFF).

The talks will also cover structural reforms in the energy sector, increasing the tax-to-GDP ratio, and potentially privatising State-Owned Enterprises (SOEs).

Additionally, discussions about reducing non-development expenditures and adopting the Sindh government’s Public-Private-Partnership model could play a role in these reforms.

Regarding the recent visit of a Saudi delegation to Pakistan, Aurangzeb described it as a positive development and a “confidence booster.”

He reiterated the government’s commitment to improving the economy with the support of the private sector.

On the monetary policy front, Aurangzeb indicated that a cut in the policy rate could occur as inflation decreases.

The State Bank of Pakistan forecasts inflation between 5-7 per cent by September 2025, with a possible rate cut as early as mid-2024.

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