Govt weighs salary, pension increases in budget 2026-27 talks linked to IMF approval

The federal government is considering a series of salary increases, pension revisions, and tax relief measures for salaried workers and pensioners in the upcoming federal budget, 24NewsHD TV reported on Wednesday.  

According to sources familiar with the proposals, the government is reviewing a plan to increase salaries of public sector employees by around 10% in the next fiscal year, although final approval will depend on the federal cabinet and ongoing talks with the International Monetary Fund.

The proposals also include merging one of four ad-hoc allowances granted between 2022 and 2025 into basic salaries, a move aimed at improving long-term pay structures for government employees.

Sources said the government is also considering tax relief for middle-income salaried individuals earning between Rs100,000 and Rs200,000 per month.

Additional proposals under discussion include a 50% to 75% increase in conveyance allowance for officers in Grades 20 to 22, while employees in Grades 1 to 16 may receive a disparity allowance to reduce pay gaps across departments.

For pensioners, officials are reviewing a proposal to increase pensions by up to 80% in line with the average inflation rate recorded over the past two years.

Sources added that income tax reductions are also being considered for salaried individuals earning between Rs1.2 million and Rs2.2 million annually.

Negotiations with the IMF over salary increases and tax relief measures are still underway, the sources said.

The government is also examining a proposal to include the armed forces in a contributory pension scheme from the next fiscal year as part of broader pension reforms.

All major proposals relating to salaries, pensions, and tax measures will be presented to Prime Minister Shehbaz Sharif and the federal cabinet before final approval, the sources added.

Officials said rising petroleum prices had also prompted a proposal to double conveyance allowances for employees in Grades 1 to 19.