In Pakistan’s federal budget for fiscal year 2026-27, the government has set aside a huge amount for pensions. Out of the total pension allocation of about Rs. 1,169 billion, Rs. 822 billion (around 70%) goes to military pensions, while Rs. 272 billion is for civil pensions. This shows how big a part pensions now play in the national budget.
Pensions are payments given to retired government employees for the rest of their lives. In Pakistan, these are mostly “unfunded” or pay-as-you-go. This means the government pays current pensions from this year’s taxes and budget, not from a saved fund built over time. The number of pensioners is large, over 1.8 million federally, with military retirees making up the majority.
Military pensions are much higher because of the size of the armed forces, longer service periods, and special allowances. Over the years, the pension bill has grown fast – from around Rs. 480 billion in 2020-21 to over Rs. 1 trillion recently. This year’s total is even higher due to salary increases, inflation adjustments, and more retirees living longer.
This large spending leaves less money for important things like building roads, schools, hospitals, and other development projects. Pensions now take up a big share of current expenditure, even more than some welfare programs.
Experts say the system needs reform. The government is introducing a new contributory pension scheme for new employees, where both the worker and the government contribute to a fund. This can help make it more sustainable in the future.
While pensions support retired soldiers and civil servants who served the country, the rising cost is a challenge for Pakistan’s economy. With debt pressures and the need for growth, balancing support for retirees with investment in the future is very important.
Simple changes like better fund management and limiting automatic increases could help control the bill without hurting those who depend on it.
