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How to defuse the ticking pension bomb in Pakistan

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The next budget will likely be quite difficult because of a large number of workers reverting back to Pakistan from the Middle East. This has caused a temporary decrease in remittances.

The present public perception benignly ignores the fact that Pakistan’s economy was put in dire straits by the Pakistan Muslim League (Nawaz) government. The Pakistan Tehreek-i-Insaf (PTI) party was late in propagating this. The PML (N) and the Pakistan Peoples’ Party (PPP) have taken full advantage of it. 

The acute fiscal and monitory problems the country faced were belatedly addressed by the PTI government when the current pandemic shattered economies all over the world. While burgeoning prices were acutely felt,the lack of effective monitoring of prices had led to a substantial increase, particularly in food items.  The GDP growth of 5.6% in the year 2017/18 came down to about 2.4% in 2018/19. Expected to be around 2.5% in the current fiscal year, it is now likely to go down to (-) 1.5%.

The next budget will likely be quite difficult because of a large number of workers reverting back to Pakistan from the Middle East. This has caused a temporary decrease in remittances. However, technology, if it is used without bureaucratic constraints, can remedy this by direct payments, both to bank accounts and through individual mobile phones. Already under pressure, exports are likely to be hit hard, further complicated by this year's low yield of cotton, wheat and vegetables, creating the need for more imports.

While searching for out-of-the-box solutions for the country’s problems, reducing expenditures is the need of the hour. The increasing pension burden is a ticking bomb in making. It forms a big chunk of the government expenditure which needs immediate attention. Prime Minister Imran Khan rightly asserted in a cabinet meeting in August that the ballooning pension expenditure will become Pakistan’s biggest budgetary challenge, further squeezing the space for development unless tackled quickly. The annual federal pension payments of Rs. 470 billion, mostly consisting of military pensions, have grown close to the annual wage bill with Federal and Provincial pension liabilities already becoming fiscally unsustainable.

Defense-related expenditure has swelled phenomenally because of pension and commutation thereof. There will consequently be little for security expenditure in the coming decade. ‘Pension Commutation’ consumes a significant portion of the national budget. A plan to make the pension fund self-sustaining needs a separate and detailed study. Retiring much earlier than their civilian counterparts, armed forces personnel can still contribute to national life without becoming a burden on the exchequer. 

Ironically, there are diametrically opposed ‘outcomes’ of ‘early retirement’ of armed forces personnel. (1) It is criminal to put them out on the streets looking for a second ‘job’ which will see them through to the ‘actual retirement age’ (2) A cursory survey will reveal that many of them waste the amount received as ‘commuted pension’ in arranging marriages, buying showy items while joining the ranks of the un-employed. (3) In a Catch-22, the State has to pay a hefty amount as ‘pension commutation’ to those who are still capable of productive work and (4) The State loses out on this vast reservoir of trained and disciplined manpower.

Utilization of the trained manpower of the defense services, both men and officers, who retire between 40-50 years of age, is crucial for the State. Retiring at 60 and after drawing their commutation of 12 years only, their civilian counterparts are due for full pension at 72 years of age. The national budget has to bear their expenses for almost 15-20 years. 

Manpower out in the market looking for jobs for which they are untrained, go through a lot of financial hardship at a critical stage of their life. With only a limited number of jobs available, it can be a demeaning and frustrating exercise for the individual. The State must defer the amount spent on ‘commuted pension’; make full use of the productivity of personnel on whom a considerable amount has been spent on training, and saving on training costs. 

It is proposed that completing service around 40-45 years of age due to no further promotion opportunity they should be absorbed in the Civil Armed Forces (CAF), Police/Magistracy, Ministry of Law and Education (particularly for employment in difficult areas) up to 60 years of age.  A lot of money will be saved through this synergy for the State. It will guarantee employment to all officers and other ranks (who opt to stay in service) up to 60 years of age, as per civil service rules. 

When absorbed in the (a) Pakistan Rangers (b) Pakistan Coast Guards (c) Frontier Constabulary KPK (d) Frontier Corps KPK (e) Frontier Corps Balochistan (f) Airport Security Force (g) Anti-Narcotics Force and (h) Police (j) as Magistrates and Judges for the lower Courts, etc., the quality of the services would improve considerably. 

This retired personnel already have adequate knowledge of administration, military law, security, intelligence, enquiries, training, etc. But they must still be put through specialized short courses/training necessary for the respective disciplines before induction. Full pension must be paid only after completion of 60 years of age. Officers-grade persons in each discipline should continue to be directly selected by these institutions. Redundant non-specialized straining schools and institutes should be closed and substituted by a specialized school with branches in each province. 

Leadership for CAF, in any case, is largely provided by the Army which will maintain quality. To ensure better coordination between all segments of CAF and the General Head Quarters (GHQ), a separate headquarters is required for the CAF under the “Strategic Force Group” or a “Homeland Security Group” under the Ministry of Interior. To compensate for enrolment of young blood in the CAFfrom deprived areas, they should be given an additional quota for enrolment in the Army.

Police have been invariably used on a political basis by successive governments, which allows police personnel latitude to do what they please. Because of high-handedness and abusive behavior, no self-respecting person wants to visit a police station (Thana). Asking a woman to go to a Thana to lodge a complaint is asking for trouble. The attitude and performance of the Thana Police affects the public the most. While genuine attempts have been made by the new cadre of police leadership over the past several years, the Thana still remains a place to avoid instead of being of support to citizens. Staffing Thanas with better trained personnel will certainly change Thana culture. It is necessary to have judicial magistrates on the premises for 24 hours.  

But where do you get mature, well-spoken magistrates? Army officers going to the police must first undergo a minimum of six months of training in the existing Police Training Institute at Islamabad for a conversion course.  Army Jawans must undergo conversion training of 1-2 months in the Police Training Centers organized under the army.

In order to keep full strength of Magistrates/Judges (in the lower Courts) and around the clock in the Thana, the posting of law-qualified retired Army Officers will be a force-multiplier. This will be an additional boost for inquiries/investigation. All Army Officers are trained/experienced in this.  Majors must have passed the “Capt to Major” Promotion Examination which has “Military Law” as a subject. One has to have practical knowledge of civil law to implement military law.  Additional training in law will certainly deliver better results and ease congestion in the courts. The list of pending cases will be reduced and efficiency of the government will improve.

The advantage for the State lies in (1) delaying payment of commutation of pension for about 15 years. The country needs every penny at this time (2) Having one Training Centre for all elements of CAF is another huge saving (3) Having a continuous inflow of trained/disciplined/experienced manpower to the CAF at all times. (4) Ex-Armed Forces officers getting adjusted as Magistrates/Judges/Teachers. The ones working in Police Stations will certainly change the overall culture which will ultimately help the State. (5) Shortage in the Magistracy/Junior Court Judges will be made up quickly. (6) Maintenance of facilities in schools, colleges and medical facilitated will improve. Officers, JCOs and NCOs after necessary courses and training can fill the dearth of administrators of schools and colleges particularly in the rural areas close to their home stations. Some who have done instructional duties in the Armed Forces schools of instructions can be employed as teachers at their levels of expertise. 

The advantages for individuals are as follows: - (1) A full continuous spell of service of sixty years like Civil Government Servants gives them job security (2) Like civil servants, they will also be free of many worries by the time they retire. (3) Will not have to run for a second job. 

It is recommended that (1) Officers and men be given the option to leave the regular service after 45 years of age eligible for Pension/Commutation only on completion of sixty years. (2) Except those who do not want to use the option of continuing service after 45 years of age, all Sepoys/NCOs/JCOs under the policy will automatically be transferred to CAF. (3) Dovetailing all the HQs will result in lots of saving. (3) Competition for promotions/appointments and internationally approved standards must be put in place during the induction process. This will need a comprehensive regulatory mechanism.

The military mind is very averse to change normally. New ideas are normally looked askance at. However, the quality of the officer corps today is better than what it was a decade or so ago. They are far better educated, better trained -- and through various ranks, have acquired tremendous combat experience in the last 20 years. They seem far more receptive to change. 

Our military hierarchy must be prepared to take these draconian but positive measures necessary to break the logjam and inertia, and release considerable funds for economic development.

(The writer is a defence and security analyst).