Pakistan’s Civil Administration and Pension Costs Surge Despite Aggressive Austerity and Rightsizing

Despite a strict official austerity policy, structural reforms, and the abolition of over 200,000 jobs, the government of Pakistan experienced a significant, double-digit increase in expenditure on the Running of the Civil Government and pension payouts during the first quarter of the current fiscal year (July to September 2025).

Rising Civil Administration Costs

The “Running of the Civil Government” expenditure recorded a 13% increase in the first quarter of FY26, rising to Rs161.2 billion compared to Rs142.5 billion in the same period last year. This surge persists despite the government’s stated commitment to rightsizing and cost reduction:

• Rightsizing Efforts: The government abolished over 150,000 posts last year, and Finance Minister Muhammad Aurangzeb recently announced the abolition of an additional 54,000 vacant posts, projected to save over Rs56 billion annually. Mergers and restructuring of federal ministries are also underway.
• Historical Trend: The rise in civil government expenses is part of a sustained upward trend, showing an increase of almost 80% since the first quarter of FY22 (when costs were Rs89.5 billion). The full-year bill for civil government operations previously crossed Rs892 billion.

Pension Burden and Subsidy Fluctuation

Pension expenditures remain a rigid and rapidly climbing fixed cost for the government:

• Pension Surge: Pension payments in the first quarter of FY26 amounted to Rs249.5 billion, a 10% increase over the Rs223 billion spent in the comparable period of FY25.
• Five-Year Increase: Over the last five years, pension expenditure has soared by approximately 125%, up from Rs111 billion in the first quarter of FY22. The total pension bill for the previous fiscal year reached Rs911 billion.

In contrast to these fixed costs, subsidy payments, which the government has discretion to postpone, showed large variations:

• Subsidy Payments: Subsidy payments saw a six-fold surge in the first quarter of the current year, reaching Rs120 billion compared to just Rs20 billion in the same period last year. This reflects significant government intervention, although the annual subsidy bill reached Rs1.298 trillion last year.

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Conclusion

The persistent upward trend in civil administration and pension costs highlights the significant challenge the government faces in implementing effective fiscal austerity, even under stringent fiscal oversight mandated by successive IMF programmes since 2021. While bans on vehicle purchases, equipment procurement, and new posts remain in effect, the fiscal data suggests that ministries and entities continue to find ways to bypass these directives, resulting in a continuous escalation of non-developmental expenditure.