As Pakistan finalizes its federal budget for the fiscal year 2025–26, the government is working to balance economic discipline with the urgent need to support public sector employees. According to credible sources, the Ministry of Finance has drafted four proposals for salary increases, including a possible flat 10% raise across the board and a 15% Disparity Allowance for BPS 17–22 officers. A structural adjustment through the merger of one ad-hoc allowance into basic salary is also on the table.
These measures aim to address employee expectations within the limits set by the IMF and existing fiscal space.
Four Salary Hike Proposals Under Consideration
Sources from the Ministry of Finance confirm that four distinct proposals have been developed for increasing salaries of government employees. These are currently under review by top government leadership and will be finalized before the budget is formally presented.
The Four Proposals Include:
- Flat 10% Salary Increase for All Civil Servants (BPS 1–22):
- Tiered Increase (5%–7.5%) Based on Pay Scale:
Lower-grade employees may receive higher percentage increases than senior officers. - Disparity Reduction Allowance Model (Differentiated by Grade):
Includes 30% allowance for BPS 1–16 and 15% for BPS 17–22. - Combination of Raise + Structural Reforms:
Involves a moderate salary increase along with merger of one ad-hoc allowance into basic pay to enhance pensionable benefits.
Ad-Hoc Allowance Merger into Basic Pay
Government employees currently receive two separate ad-hoc relief allowances. As part of salary reform, the Ministry of Finance has proposed to merge one of these ad-hoc allowances into the basic salary. The intended outcomes include:
- Long-term pension benefits, as merged pay becomes pensionable.
- Streamlined payroll structure, reducing complexity in future pay revisions.
- Improved fairness in salary calculations across departments.
This proposal is widely supported by employee unions and is considered a sustainable way to enhance take-home pay without inflating recurrent expenditures drastically.
15% Disparity Allowance for Grade 17 to 22 Officers
To address intra-departmental pay inequities, a 15% Disparity Reduction Allowance is under active consideration for BPS 17 to 22 employees. This is intended to balance the gap between officers serving in different ministries, divisions, and autonomous bodies where compensation packages vary significantly.
A similar allowance—30% for BPS 1–16—was already under discussion. This staggered model ensures that the disparity reduction mechanism benefits both junior and senior employees in a proportionate and structured manner.
Flat 10% Salary Increase: Broad-Based Relief Option
One of the most politically viable proposals is a uniform 10% increase in basic salary for all civil servants (BPS 1 to 22). This approach offers simplicity, equity, and quick implementation. It’s also easier to communicate and defend publicly and may serve as a middle ground between IMF restrictions and domestic political pressures.
However, fiscal experts caution that a flat raise across all pay grades may disproportionately benefit higher-grade officers and add significant pressure on budgetary allocations.
Final Approval Awaits Cabinet Decision
All salary-related proposals—including the ad-hoc merger and disparity allowances—will be submitted to the Federal Cabinet on June 10, 2025, for approval. Only after this meeting will the final decision be incorporated into the budget speech. The government must also consult the IMF to ensure that these adjustments align with ongoing structural reform agreements.
Conclusion: Competing Priorities, One Critical Decision
The Government of Pakistan is weighing its options carefully. The four salary proposals, 15% disparity allowance for senior officers, and ad-hoc merger represent a significant effort to modernize public sector compensation under tight economic constraints.
Whether the government opts for across-the-board relief, targeted allowances, or structural reforms, the final decision will have lasting consequences—not just for employee morale but also for the broader economy and Pakistan’s financial credibility.