Payments on account of pension and retirement benefits of government employees from public exchequer have been ballooning, following a significant rise in the number of retired personnel, officials said.
Rise in life expectancy, coupled with thousands of retirements of public servants, every year has led to a marked rise in the number of pensioners, thus putting a strain on the public finance.
Currently, Bangladesh has around 1.5 million pensioners. It outnumbers the existing public administration manpower of 1.26 million.
Of them, around 550,000 retired government employees withdraw pension and the rest allowances on a monthly basis.
The rest had surrendered their pensions at the time of retirement through commutation by taking gross benefits. But they are entitled to get medical and festival allowances.
The number of pensioners grows annually, on an average, by more than 30,000. However, there is, of late, a downward trend about number of retired government personnel, following a rise in the retirement age by two years to 59.
Notwithstanding this, the allocation under the national budget for payment of pension and gratuities stands at Tk 84.83 billion for the current fiscal year (FY), up at least seven times from the level 15 years back.
In FY 2000-2001, public expenditure for the pension and gratuities was only Tk 12.37 billion.
The expenditure is now set to rise further after implementation of the new national pay scale.
Every National Pay Commission recommends a hike for the pensioners, too. The actual hike, however, varies at times with the original recommendations.
Sometimes it grows proportionately and sometimes is increasing at par with the new national pay scales and sometimes lower less than those.
Pension and gratuity payments now account for 5.0 per cent of total non-development budget, according to budget documents.
Sources at the office of the Comptroller-General of Accounts (CGA) said the rise of retirement now moves very slow, following the rise in the tenure of service.
"It will go up from next year and it will continue for the next couple of years," said a senior official at the CGA office.
Responding to a FE's query about the fiscal burden in the extent of a following rising number of employees going on retirement, some of the country's economists said the public policymakers should now think about the formation of a funded pension scheme retirement fund system contributions from both ends during the tenure of the service of an individual employee in order to ease its fiscal burden.
The government, they observed, should take actions to enhance productivity of the officers and employees during their active years, thus ensuring provision of better and quality services to the people.
Dr Zahid Hussain, lead economist at the Dhaka office of the World Bank (WB), said this is high time for the authorities to create such a fund for the pensioners as the burden on the public exchequer is rising every year.
The number of retired personnel will grow naturally and it can be stopped for the time being by raising the retirement age, he noted.
"To my mind, this is not a permanent solution, rather setting up of such a fund is a possible answer to the problem," he observed.
Currently, government allocates funds through its annual budget for footing the bell on account of pension and retirement benefits as an on-going ad hoc arrangement and the office concerned disburses the money to the retirees.
This means such budgetary fund, as mentioned above, remains idle for, at least, a year.
"If there was a separate fund and it could be invested in profitable ventures or securities, then it would have given returns in the form of dividends," the WB economist said.
Dr. Hussain said productivity of working and employed people should be enhanced, considering long-term financial benefits.
"I think people will take the long-term benefits for the government employees if they get quality services from the public servants," Dr. Hussain noted.
Dr. Ahsan H Mansur, executive director at the Policy Research Institute of Bangladesh (PRI), said a contribution-based pension system should be introduced immediately to ease the government's fiscal burden.
"With pension payments rising and the Bangladeshis living longer," Dr. Mansur said, "employees will be eligible to draw pension only after reaching a certain age from a funded pension scheme."
Currently, civil servants retire at 59. Government raised it as the average life expectancy grew to 69 for the male and 72 for the female.
The government might contribute 10 per cent to the fund and employees should make equal contributions to the fund. Such a fund might be managed and administered through a board of trustees.
Currently, Government funds pension and retirement benefits through 'pay as you go' method and it does not make provisions for funding such benefits on a regular basis.
Under the existing legal provisions, a government employee gets pension until his death and after his death his wife gets the benefits until her death. It's called family pension.
Dr. Mansur said the rise on account of pension and retirement benefits' bell is phenomenonal considering other sectors.
"It is now seven times higher than what it was 15 years back, and the burden will mount further after the introduction of new pay scales. So the pension fund should immediately be institutionalised," he stated.
He also said this is the best practice across the globe. "Very unfortunately, we are yet to think about it."
He made strong pleas for a further extension of retirement age, particularly for the women as their life expectancy is higher than that of their male counterparts.
The government, Dr. Mansur pointed out, cannot estimate the amount of resources that are necessary for future pension payments as many can go into retirement after completing 25 years of services, and thus there are no cut-off dates.
Dr AK Enamul Haque, professor of Economics at the East West University, also told the FE that the government should institutionalise a national contributory fund for both the employees, working in both public and private sectors.
"It will help reduce the fiscal burden on the government and create a new avenue for government borrowings," Dr. Haque said.
"Definitely, this will be an affordable tool -- and a sustainable one," he said.
Dr. Haque said there are many potential sectors for investment of the fund money.
Given the current economic trends, the funding of it by the contributors will not face any problem, he viewed.
The central bank might make a move to institute the fund, he suggested.
(Concluded)
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