Pakistan is preparing to secure a $500 million loan from the Asian Development Bank (ADB) to finance further reforms in the public sector pension system as the government’s pension costs continue to rise.
The proposed financing, equivalent to around Rs. 138.48 billion, will be provided under a program called the Transforming Public Sector Pension Program, according to government documents.
The concept paper for the proposed program has already been approved by the Central Development Working Party (CDWP).
Under the plan, the ADB loan will be provided as a three-year program loan, with implementation scheduled from November 2026 to November 2029. The financing will be tied to progress on agreed pension reform measures, according to sources in the Finance Ministry.
The ADB is also expected to provide around Rs. 159.2 million in technical assistance to support the proposed reforms.
The government’s federal pension bill has now reached approximately Rs. 1.169 trillion annually, putting increasing pressure on the national budget.
Finance Ministry officials have said the existing pension structure has become a major financial burden, with the government required to allocate funds every year to meet pension payments for retired employees.
Officials have also pointed to the rising cost of pensions and growing long-term liabilities, which are reducing the government’s fiscal space for sectors such as health, education and infrastructure.
Pakistan began introducing a contributory pension scheme for new government employees in 2024 as part of efforts to address the growing pension burden. The government has also introduced changes to the previous defined benefit system.
However, officials say further administrative and financial measures are needed to implement the reforms, establish the new pension structure and strengthen the institutions responsible for managing it.
Pakistan has previously secured financing and technical assistance from international development institutions, including the ADB and World Bank, for pension reform efforts.
