Govt likely to propose 7.5pc raise in salaries

ISLAMABAD: The incoming federal government is likely to propose a salary increase of 7.5 per cent for employees and a higher relief for pensioners in the next budget.

A senior government official told Dawn that because of the tight fiscal position, the finance ministry would recommend five to seven per cent salary increase in view of six per cent inflation. “If government decided to be more generous, he said, it might increase the salaries by up to 10 per cent.

He said that one per cent salary increase would translate into Rs2 billion per year while 7.5 per cent increase would have an annual fiscal impact of Rs15bn and 10 per cent increase would take it to Rs20bn.

The case for a higher increase in pensions was strong because its increase over the past five years has been less than the salary raise.

The salaries and pensions were earlier increased at a uniform rate but two years ago the PPP government raised salaries by 50 per cent and pensions by 20 per cent.

At least this 30 per cent difference, the official said, needed to be removed. This may not be possible initially but something has to be done about pensioners.

He added that pensions could be increased by 15 to 20 per cent.

But a final decision, he said, would be made by the federal government in consultation with provincial authorities because of its fiscal impact on the provinces.

He said a 7.5 per cent increase would have an annual impact of Rs30bn on Punjab because of higher number of employees, Rs15bn on Sindh and Rs15bn on Balochistan and Khyber Pakhtunkhwa put together.

At the time of the last two budgets, the provincial governments, particularly of Punjab, criticised the federal government for unilateral salary increase which added to their burden and negated the benefit of additional transfers on account of the seventh National Finance Commission award.

Sources said that the new government might also consider a substantial increase in house rent and medical allowance of government employees.

Usually the house rent should be 15 per cent of basic salary. Although the PPP government had increased salaries by about 135 per cent during its five-year tenure, the allowances remained frozen.