The Pension Management Office has sought an additional Rs25 billion from the finance ministry as the allocated budget will not be enough to pay the retired government employees starting next month.

The government, while unveiling its budget for the current fiscal year, had allocated Rs52 billion. However, according to the office, it will require as much as Rs77 billion to pay to pensioners for the entire fiscal year.

“We sent the request to the finance ministry in early February seeking a fund of additional Rs25 billion,” said Bishnu Prasad Kharel, chief of the Pension Management Fund. “We don’t have the money to pay the retired staff starting from Chaitra [mid-March].”

Even though the pension burden has been growing, the government reduced the allocation in the current fiscal year’s budget. In the last fiscal year, around Rs55 billion was allocated and an additional required budget was provided later.

With the government facing a resource crunch, it is allocating less than the required amount for pensions, a compulsory liability. In the last fiscal year, the Pension Management Office also sought as much as Rs20 billion to bridge the funding gap.

According to this office, around 18,000 government employees, including those in the civil service, security forces, intelligence services, judiciary, and public school and college teachers, retire every year.

“The financial burden grows by around Rs2 billion a year,” said Kharel. If the government hikes the salaries of government employees, pensions for retired government staff also grow automatically.

According to the Pension Management Office, the pension liability increased from Rs37 billion in the fiscal 2016-17 to around Rs75 billion in the fiscal year 2022-23.

As pension is a compulsory liability like salary, the government cannot shy away from managing resources for the purpose. In fact, pension spending has seen a steady rise with the liability more than doubling in the past seven years.

There are around 300,000 pensioners in the country. This, however, does not cover those who are part of the contribution-based pension scheme, according to the office.

In order to address the growing financial burden on the state, the government has been implementing the contribution-based pension scheme for its workers since 2019.

Besides pensions, the government’s spending on social security allowance and various other schemes has been growing rapidly in recent years, raising questions about the sustainability of these schemes.

The government spent as much as Rs112 billion in the last fiscal year 2022-23 in distributing social security allowances, according to the Department of National ID and Civil Registration.

Elderly people, single women, children, and disabled people among others are beneficiaries of social security allowances.

When the large amount of government resources are spent on these schemes, there will be limited resources available for development activities.

Citing the growing burden of pensions, the government has proposed hiking the retirement age of civil servants to 60 years from 58 years in the new Federal Civil Service Bill registered in Parliament on Monday.

“We have to spend around Rs6 billion every year on pensions,” said Rajbhai Shrestha, information officer at the Pension Management Office. “More should be allocated including the extra pensions to be paid during the Dashain festival.”