The federal government has prepared several proposals to provide relief to salaried employees and pensioners in the upcoming budget for fiscal year 2026-27, keeping inflationary pressure in view.
According to sources, a proposal is under consideration to increase government employees’ salaries by 10% in the next budget.
However, any increase in salaries will be subject to approval from the federal cabinet and the International Monetary Fund. Negotiations with the IMF on salary increases and tax relief are currently underway.
Another proposal under review is to merge one out of four ad hoc allowances into the basic salary. These ad hoc allowances were granted between 2022 and 2025.
Tax relief expected for salaried class
The government is also considering relief for the monthly salaried class earning between Rs100,000 and Rs200,000. Sources said an income tax reduction is expected for those earning annual salaries between Rs1.2 million and Rs2.2 million.
Due to the rise in petroleum prices, a proposal has been prepared to double conveyance allowance for employees from Grade 1 to 19. For officers in Grade 20 to 22, a 50 to 75% increase in conveyance allowance is also under consideration.
Disparity allowance proposed for lower grades
A proposal to grant disparity allowance to government employees from Grade 1 to 16 is also part of the budget discussions for 2026-27. The measure is aimed at providing additional support to lower-grade employees.
For pensioners, a proposal has been prepared to increase pensions by up to 80% of the average inflation rate recorded over the past two years.
The proposal is aimed at helping pensioners cope with rising living costs.
Armed forces contributory pension scheme
The government is also considering a proposal to include the armed forces in the contributory pension scheme from the next financial year. This proposal is part of wider discussions on salary and pension reforms.
The prime minister and the federal cabinet will be taken into confidence on all proposals related to salaries and pensions. Final decisions will be made after cabinet review and consultations with the IMF.
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