Prime Minister Shehbaz Sharif has formed an eight-member special committee to review and propose significant allowances and salary increases for federal government employees, with changes set to take effect on July 1, 2024.
The decision comes amid a shortfall in the government’s revenue collection, which has only increased by 23% in the first five months of the current fiscal year, falling short of the targeted 40% growth needed to meet the revenue goal of Rs12.97 trillion by June 30, 2025. To address the revenue gap, the government plans to implement contingency taxation measures, including a mini-budget, as part of its agreement with the International Monetary Fund (IMF).
Despite the implementation of these measures, concerns remain among government employees, particularly in light of the narrative of lower inflation. Although the consumer price index (CPI) dropped to a 78-month low of 4.9% in November, this decrease is attributed to a higher base effect from last year’s peak inflation rate of 29%.
Reports indicate that the Prime Minister’s Office and the Ministry of Finance have received numerous requests from various employee groups for increased compensation, a demand heightened after substantial salary hikes and allowances were granted to judges in recent months.
In response, PM Shehbaz Sharif has established a special committee led by Finance Minister Muhammad Aurangzeb to review the existing allowances and recommend new ones for government employees. The committee, which includes representatives from the finance, cabinet, and defense ministries, as well as individuals with ties to senior civil servants, will evaluate proposals from the Finance Division regarding potential revisions to current allowances. Their recommendations will be presented to the cabinet during the annual budget approval process.
This move follows a significant salary increase for civil servants and armed forces personnel in June, as well as a 100% pay hike for judges last month.
A study by the Pakistan Institute of Development Economics (PIDE) highlighted a concerning trend in government expenditure, revealing that the federal government spends over Rs8 trillion annually on its 1.92 million employees, including pensions and other benefits. However, the study raised concerns about the lack of transparency regarding the contribution of these employees to taxpayer outcomes.
PIDE’s report also noted that while the judiciary enjoys the highest benefits, the Pakistan Administrative Service (PAS), formerly known as the DMG, often receives disproportionately favorable treatment, hindering the advancement of professionals from other sectors.
The total cost of public servants in Pakistan is approximately Rs3 trillion, with pensions accounting for around Rs1.5 trillion. Additional costs for project workers and government company employees add another Rs2.5 trillion, while military salaries total about Rs1 trillion. The study also criticized the Basic Pay Scale (BPS) system, which has undergone several revisions since its introduction in 1983. Despite updates in 2022, the BPS system remains rooted in a socialist pay structure that favors the PAS with non-monetary benefits, often sidelining technically skilled professionals.
Despite perceptions of civil servants being underpaid, PIDE concluded that their overall compensation—including cash allowances and in-kind benefits—often exceeds what is reflected on salary slips. Senior officials particularly benefit from perks such as official vehicles and medical reimbursements, which significantly increase the overall cost of civil servants.
