The federal government has prepared proposals for salary increases and pension revisions for public sector employees and retirees in the upcoming Budget 2026–27, alongside plans to introduce a Defined Contributory Pension (DCP) scheme for the armed forces.

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

The proposed salary and pension adjustments are linked to inflation, with the Consumer Price Index (CPI) expected to average around 7.5 percent in the current fiscal year.

Despite operating under the strict conditions of the International Monetary Fund program, the government has drafted three ad-hoc relief options for civil and military employees: 5 percent, 7.5 percent, and 10 percent increases.

These proposals have been prepared by the Finance Ministry’s regulation wing and are currently under consideration.

No final decision has been taken. The proposals will be discussed with the IMF, followed by cabinet approval before inclusion in the federal budget.

The final relief package will depend on available fiscal space after negotiations with the IMF. The government has also sought a 5 to 10 percent reduction in the tax burden on salaried individuals, subject to fiscal constraints.

Under IMF-backed fiscal discipline, Pakistan has committed to achieving a primary surplus of 2 percent of GDP in the next budget, equivalent to around Rs. 3 trillion. This will require expanding the tax base and reducing expenditures.