THE rising annual pension bill of the Khyber Pakhtunkhwa government is assuming proportions too big for it to manage.

Pension payment has recorded a growth of 35 per cent this year compared to the last financial year, as per the Khyber Pakhtunkhwa (KP) government documents. While the province’s overall operational budget is slated to increase by 27 per cent, the salary budget is also estimated to go up 34 per cent.

If the current trend continues, development spending would have to be cut, or the provincial government would have to avail credit to fulfill its obligation to retirees.

The province will pay over Rs21.58 billion in pension to retirees during this fiscal year, against Rs11 billion in 2010-11 and Rs16 billion in 2011-12.

Some officials estimate the pension bill will exceed the Rs40 billion mark in the next few years, as the number of retirees is increasing every passing year. Whenever the public sector employees get a pay raise, pensions are also increased.

A few months before leaving office in March, the last government extended the pension net to all employees who were eligible for payment from the provincial provident fund.

According to official estimates, more than 55,000 employees would start retiring over the next 10 to 12 years, resulting in a substantial increase in the pension bill.

Normally, development spending takes a hit when non-development expenditure goes up. KP’s annual development plan for the current financial year is at Rs97 billion, of which more than Rs20 billion is to come from foreign donors.

The province not only needs money to build roads, hospitals, schools, canals, and other similar projects, but it also needs billions of rupees to maintain its existing infrastructure facilities.

Of the Rs303 billion in total revenue receipts expected this fiscal year, Rs115 billion will be spent on the payment of salaries to provincial government employees, and Rs21.5 billion on pensioners.

While the province’s revenue base is unpredictable, its expenditure on salary and pension is unavoidable. KP is already passing through this difficult experience during the current year. Federal transfers have been far less than official estimates for the first 10 months of the current fiscal.

Many believe that the provincial government will have to give up its status as the biggest employer in the province, with more than 385,518 employees. That number grew by well over 8,000 this year, as new employees were recruited by the last government in an election year.

Some experts suggest that KP should come up with a strategy to put a tab on its growing pension bill, and instead encourage consultants to design investment plans for government employees for their post-retirement days.