Pakistan plans $500m ADB loan for pension reforms

The federal government plans to secure an additional $500 million loan from the Asian Development Bank (ADB) for a programme aimed at reforming Pakistan’s public sector pension system, according to official documents and Finance Ministry sources.

The loan, equivalent to around Rs138.48 billion, will be obtained under the proposed “Transforming Public Sector Pension Program”, with the programme expected to run for three years.

According to the documents, the ADB programme is scheduled to begin on November 1, 2026, and conclude in November 2029.

Pension bill reaches Rs1,169 billion

The federal government’s annual pension bill has risen to around Rs1,169 billion, according to the documents.

Finance Ministry officials have described the existing pension system as a growing financial burden on the national exchequer. Pension payments for retired government employees are made annually from the federal budget, while pension expenditures and long-term liabilities continue to increase.

Officials say the rising cost is reducing fiscal space available for sectors including health, education and infrastructure.

The proposed ADB loan would be linked to the achievement of specified reform outcomes, according to Finance Ministry sources.

New contributory scheme introduced

The government introduced a contributory pension scheme for new employees in 2024 as part of broader efforts to address the long-term cost of pensions.

Officials said reforms have also been introduced in the existing defined-benefit pension system.

The proposed programme will focus on institutional reforms, along with administrative and financial measures intended to support the transition towards a more sustainable pension framework.

The ADB is also expected to provide technical assistance worth Rs159.2 million under the proposed programme.