Govt Officers, Armed Forces May Get Higher Salaries, New Pension System in Budget

The federal government has prepared proposals for increasing salaries and pensions of public sector employees and retirees in the upcoming federal budget 2026–27, while also planning to introduce a Defined Contributory Pension (DCP) system for the armed forces.

The new contributory pension system has already been implemented for newly recruited civilian employees in the previous budget.

The proposed increases are linked to inflation, measured through CPI, which is expected to average around 7.5 percent during the current fiscal year.

Despite operating under the strict conditions of the International Monetary Fund (IMF), the government has developed three options for salary and pension revisions for civil and military employees. These include possible ad-hoc relief of 5 percent, 7.5 percent, or 10 percent.

The Finance Ministry’s regulation wing has prepared these tiered proposals for consideration.

No final decision has been made yet. The proposals will be discussed with the IMF, after which they will require approval from the federal cabinet before being presented in the budget speech.

The final level of relief will depend on available fiscal space following negotiations with the IMF. The government has also requested a 5 percent to 10 percent reduction in the tax burden on salaried individuals, but this too is subject to fiscal constraints.

Under IMF-mandated fiscal discipline, Pakistan has agreed to achieve a primary surplus equal to 2 percent of GDP in the next budget, roughly Rs. 3 trillion. This will require expanding the tax base and cutting expenditures.