In the impending federal fiscal year 2023-24 federal budget, the government anticipates increasing civil servants’ salaries up to 30% via ad hoc allowances and boosting pensions by 20%. The Pay and Pension Commission has advocated for a 100% rise in medical and conveyance allowances for government staff and a 10% surge in ad hoc allowances.
However, sources from the Ministry of Finance’s Regulation Wing have stated that three proposals related to salary and pension increases have been compiled. These will be discussed in a special cabinet meeting by Prime Minister Shehbaz Sharif. The final verdict on the increments will be made in this meeting, and the selected proposal will be brought forward to the parliament alongside the budget.
The first proposal suggests a 100% ad hoc increase in medical and conveyance allowances for employees, following the Pay and Pension Commission’s advice. A 10% increase in allowances has also been proposed. Pensioners could see their medical allowances doubled and pensions increased by 10%.
The second proposal seeks to increase the salaries of all government employees (grades one to 22) by 25%, along with a rise in medical and conveyance allowances. Pensioners’ medical allowances and a 15% pension hike may also rise.
The third proposal being considered recommends a 30% salary rise for employees (grades one to 16) and a 20% increase for Grades 17 and above officers. A 50% surge in medical and conveyance allowances and a 20% rise in pensions are also proposed.
Proposals are also being evaluated to augment the pensions of Employees’ Old-Age Benefits Institution (EOBI) pensioners and workers’ minimum wages. While the Ministry of Finance recognizes the soundness of the Pay and Pension Commission’s suggestions, the final say is with the government.
The Commission’s report acknowledges concerns over the high pension bill and financial institutions’ concerns, including those of the IMF. It proposes a contributory or voluntary pension scheme for new employees. A voluntary pension scheme has already been enacted for government employees in Khyber-Pakhtunkhwa (K-P), with the Securities and Exchange Commission of Pakistan (SECP) approving four Voluntary Pension System (VPS) fund schemes for them.
Under the Voluntary Pension System Rules, 2005, employees and self-employed individuals can contribute to VPS during their employment, ensuring a regular income after retirement. The SECP stresses that these new pension schemes will be funded through employee and government contributions.