Pakistan Government Proposes 10% Salary Hike for Government Employees and 7% Pension Hike for Retirees

Strategic Insights -

The Pakistan government has unveiled a proposal to boost the salaries of government employees by 10% and increase the pension of retirees by 7% as part of its upcoming budget for the Fiscal Year 2025-26. The federal finance minister, Muhammad Aurangzeb, made the announcement during his National Assembly budget speech, stating that the salary and pension hikes will benefit federal government employees from Grade 1 to 22. Additionally, the monthly allowance for differently abled employees will increase to Rs6,000 from the current Rs4,000. The budget also includes a reduction in income tax rates for the salaried class, with the biggest relief going to those earning between Rs600,000 and Rs1.2 million per year. The finance minister credited recent policy actions for bringing economic stabilisation through reform measures.

Key Takeaways:

  • The proposed salary hike of 10% will benefit federal government employees from Grade 1 to 22.
  • The monthly allowance for differently abled employees will increase to Rs6,000 from the current Rs4,000.
  • Income tax rates for the salaried class will be reduced, with significant cuts for those earning between Rs600,000 and Rs1.2 million per year.
  • Taxpayers earning up to Rs2.2 million annually will also benefit from reduced tax rates, with a drop from 15% to 11%.
  • Defence expenses will increase by 20% to Rs2.55 trillion ($9 billion) for the upcoming fiscal year.
  • The budget features a 7% decrease in overall spending, despite the increase in defence expenses.
  • The government projects 4.2% economic growth in 2025-26, steady from the previous fiscal year's growth rate of 2.7%.
  • Pakistan's COVID-19 crisis has spurred the current economic growth expansion and exports recovery high demand for 4.2% growth projection.

Statistics:

  • The proposed salary hike will benefit approximately 1.2 million federal government employees.
  • The monthly allowance for differently abled employees will increase by Rs2,000.
  • Individuals earning between Rs600,000 and Rs1.2 million per year will see their income tax rate drop from 5% to 2.5%.
  • The 20% hike in defence expenses will bring the total allocation to Rs2.55 trillion ($9 billion) in the upcoming fiscal year.
  • Overall spending will decrease by 7% in the upcoming fiscal year.
  • Economic growth is projected at 4.2% in 2025-26.
  • Economic growth expansion has brought a demand for 4.2% growth projection.

Sources:

  • The Express Tribune (Pakistan)
  • Pakistan's Federal Finance Minister Muhammad Aurangzeb's National Assembly budget speech for the Fiscal Year 2025-26.