Pakistan Plans $500m ADB Loan to Reform Public Sector Pensions

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."

Programme Timeline

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

The Pension Bill

The federal government's annual pension bill has risen to around Rs1,169 billion, according to the documents. Pension payments for retired government employees are made annually from the federal budget.

Reform Steps Already Taken

The government introduced a contributory pension scheme for new employees in 2024 as part of broader efforts to make pensions more sustainable over the long term. Officials said reforms have also been introduced in the existing defined-benefit pension system.

What the New Programme Will Focus On

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

Pakistan has previously secured financing from international development institutions, including the ADB and World Bank, for pension-related reforms.