Islamabad: The federal government has prepared different proposals to increase salaries and pensions in the upcoming federal budget for fiscal year 2026-27.
According to sources, the government is also considering the implementation of a defined contributory pension scheme for personnel of the armed forces from the next financial year.
Salary Increase Linked to Cabinet and IMF Approval
Sources said that any increase in salaries will be subject to approval from the federal cabinet and the International Monetary Fund.
One of the proposals under consideration is to merge one of the four ad hoc allowances given to government employees between 2022 and 2025 into the basic salary.
The government is also considering a salary increase of up to 10 percent for public sector employees.
Relief Proposed for Salaried Class
According to sources, the government is reviewing relief measures for the salaried class.
A proposal has been prepared to provide relief to people earning between Rs100,000 and Rs200,000 per month.
In addition, a reduction in income tax is expected for salaried individuals earning between Rs1.2 million and Rs2.2 million annually.
Talks with the IMF are ongoing regarding salary increases and tax relief.
Conveyance Allowance May Be Increased
The government is also considering an increase in conveyance allowance due to rising petroleum prices.
According to sources, there is a proposal to double the conveyance allowance for employees from Grade 1 to Grade 19.
For officers in Grade 20 to Grade 22, a 50 to 75 percent increase in conveyance allowance is also under consideration.
Disparity Allowance for Lower Grade Employees
A separate proposal is being reviewed for disparity allowance for employees from Grade 1 to Grade 16.
The move is aimed at reducing income gaps among government employees and providing financial support to lower-grade staff.
Pension Increase Also Under Review
Sources said that pensioners may receive an increase based on average inflation over the last two years.
A proposal has been prepared to increase pensions by up to 80 percent of the average inflation rate.
The final decision will depend on fiscal space, cabinet approval, and talks with the IMF.
Armed Forces May Be Included in Contributory Pension Scheme
The federal government is also considering including the armed forces in the contributory pension scheme from the next financial year.
Sources said that proposals related to salaries and pensions will be presented to the Prime Minister and the federal cabinet for approval.
The final package is expected to be announced in the federal budget for fiscal year 2026-27.