The Sindh government, in the fiscal budget 2011-12, has formulated a financial strategy for clearing its long-term liabilities, aggregating to over Rs561 billion on account of pensions and provident funds of its retired employees. “From this year, the government of Sindh has adopted a formal long-term policy of setting aside amounts equal to 2 percent of the gross provincial revenues into an already established Pension Fund,” Finance Minister Murad Ali Shah told Sindh Assembly while unveiling Budget FY2011-12. According to the finance minister, as of June 30 last year the actuarial experts had calculated the provincial government’s liabilities against pensions and general provident funds (GP-Fund) at a massive Rs518.273 billion and Rs43.903 billion, respectively. This, Shah said, was partly because of the fact that hitherto there had not been a clear policy on how to finance the increasing liability. “Over the last several years, there has been a steep rise in pension liabilities of the government of Sindh due to an accelerated pace of retirements of employees inducted in the 1970s and 1980s and also because of the series of pension augmentations during the last few years.” The said Pension Fund would have the mandate to “gainfully” invest the accumulated amounts and the laid down policy of not to use accumulated balances for any other purpose, the minister explained. Besides, Shah said, his government had also taken a policy decision to address the build-up of liabilities towards its employees’ GP-Fund contributions. “It has been decided that from this year onwards, the actual expected contributions from employees shall be gainfully invested in a separate fund,” he added. That separate funds, the finance minister said, would be used to retire the GP-Fund liabilities only when the fund had accumulated enough balances to match the liabilities. “These policy measures shall gain more importance in the coming years as a sizeable number of government employees are due for retirement over the next five to 10 years. It shall also increase the pension and GP-Funds obligation considerably, resulting in an immense budgetary squeeze if not addressed satisfactorily at present,” the minister warned.
