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ISLAMABAD: ( Updated) A 10% salary increase for government employees in the upcoming Budget for 2025–26 now seems unlikely. Government sources indicate that the raise may be limited to 6.5% due to fiscal constraints and ongoing negotiations with the IMF. Although Prime Minister Shahbaz Sharif instructed the finance minister and the cabinet to approve a 10% salary hike, it appears that the final decision may be revised.
According to reports, a high-level meeting chaired by Prime Minister Shehbaz Sharif reviewed the proposed salary adjustments. During the session, the economic team provided a detailed briefing, indicating limited fiscal space to accommodate a full 10% increase.
Sources say the final decision on the salary increase for government employees will be made during today’s federal cabinet meeting, scheduled to take place at the Parliament House. The cabinet’s approval is required before the budget proposals are formally presented in the National Assembly.
Initial budget proposals had suggested a 10% raise in salaries and a 7.5% to 10% hike in pensions. However, with the IMF reportedly objecting to the current tax-free income threshold of Rs1.2 million, the government is considering imposing a minimum 1% income tax on salaries at that level and reducing the exemption limit to Rs600,000.
While a 2.5% general relief across all income tax slabs is under review, no final decision has been reached. Officials are weighing options to strike a balance between meeting IMF conditions and providing modest relief to public servants.
Finance Minister Muhammad Aurangzeb is expected to present the Federal Budget 2025–26 in the National Assembly today. The budget will also be accompanied by the Finance Bill, 2025, which will lay out the final terms of the annual fiscal plan.
