Salaries of govt employees increased by 10%, pensions 7%

ISLAMABAD: At a time when the salaries of cabinet ministers, parliamentarians, the Senate chairman and the National Assembly speaker have been significantly increased, the federal government has proposed a 10 percent raise in the salaries of government employees from Grade-1 to Grade-22 for the fiscal year 2025-26.

Initially, the Finance Ministry had recommended a six percent increase. However, the federal cabinet, in a meeting chaired by Prime Minister Shehbaz Sharif, approved a 10 percent raise for all government employees.

The budget for 2025–26 also proposes a seven percent increase in the pensions of retired government employees.

Furthermore, the monthly Special Conveyance Allowance for persons with disabilities is set to increase from Rs4,000 to Rs6,000. A 30 percent Disparity Reduction Allowance for eligible government employees has also been included in the budget proposals. Acknowledging the exemplary services of the Pakistan Armed Forces in defending the country, the government has proposed a Special Relief Allowance for officers, junior commissioned officers (JCOs) and soldiers. This expenditure will be covered under the allocated defence budget for 2025-26.

In his budget speech, Federal Minister for Finance Muhammad Aurangzeb also unveiled a series of pension reforms aimed at reducing the long-term fiscal burden on the national exchequer.

Key proposals include discouraging early retirement and linking future pension increases to the Consumer Price Index (CPI), replacing arbitrary adjustments. The minister also recommended limiting the duration of family pensions to 10 years following the death of the pensioner’s spouse. Additionally, retirees rejoining public service would be required to choose between drawing a pension or receiving a salary — not both. Aurangzeb said these reforms are critical to ensure the long-term sustainability of the pension system and to safeguard public finances for future generations.