Govt to Link Increase in Pensions to Inflation Rate

The Finance Ministry will most likely scrap the lump sum increase in pensions of retired civil servants and instead increase them by 80 percent in line with the inflation rate over the next two years, high-level sources told ProPakistani. Sources said the Ministry of Finance is opting for a new mechanism that ties pension hikes to inflation. Under the proposed system, the government aims to reduce the growing pension burden on the treasury. The government has allocated Rs. 1,014 billion for pensions in the current financial year. In this year’s budget, the Finance Ministry decided to give flat a 15 percent increase in pension payouts to retired employees, but the new procedure will adjust future increments based on inflation data provided by the State Bank of Pakistan. Sources added that the move follows recommendations from the Pay and Pension Commission 2020, which advocated linking pension adjustments to inflation. The Finance Ministry has also set a target to bring inflation under control by bringing it way down in the single-digit category by next fiscal year.