The federal government has initiated plans to offer significant allowances and a salary increase of up to 25% for its employees, effective July 1, 2024, Dawn reported.
This decision comes even as the government’s revenue collection has only increased by 23% in the first five months of the current fiscal year, falling short of the targeted 40% growth needed to achieve a revenue goal of Rs12.97 trillion by June 30, 2025.
To address the revenue shortfall, the government is set to introduce contingency taxation measures—essentially a mini-budget—as part of its ongoing agreement with the International Monetary Fund. But this has not alleviated concerns among government employees, particularly in light of a narrative of lower inflation that has failed to resonate, even as 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 indicated that the Prime Minister’s Office and the Ministry of Finance have been inundated with requests from various stakeholders and employee groups for additional compensation. It has been amplified following substantial salary increases and allowances granted to judges in recent months.
In response, PM Shehbaz has established an eight-member special committee tasked with reviewing existing allowances and proposing new ones for government servants during the current financial year. The committee, led by Finance Minister Muhammad Aurangzeb, includes key representatives from various sectors including the finance, cabinet, and defence ministries, as well as members who have personal ties to senior civil servants.
The committee’s primary objective is to evaluate proposals submitted by the Finance Division regarding the revision or introduction of new allowances for government employees. Their recommendations will be presented to the cabinet when the annual budget is approved.
This move follows a significant salary increase for civil employees and armed forces personnel last June, which was followed by a staggering 100% hike in compensation for judges just last month.
A study conducted by the Pakistan Institute of Development Economics highlighted a concerning trend regarding government expenditure. It revealed that the federal government spends over Rs8 trillion annually to pay its 1.92 million employees, including pensions and a multitude of perks and benefits, yet there is little transparency regarding their contributions to taxpayer outcomes.
The study noted that while the judiciary enjoys the highest benefits, the Pakistan Administrative Services, formerly known as the DMG, often benefits disproportionately, hindering the progress of professionals from other sectors.
According to PIDE, the overall cost of public servants in Pakistan is approximately Rs3 trillion, with pensions accounting for around Rs1.5 trillion. Additional expenditures for project workers and employees of government companies add another Rs2.5 trillion, while military salaries total about Rs1 trillion.
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The study also critiqued the Basic Pay Scale system, which has undergone multiple revisions since its establishment in 1983. The latest update occurred in 2022, but such adjustments have not aligned with modern human resource practices. The BPS system continues to operate under a socialist pay structure, favouring the PAS with non-monetary benefits and advantageous appointments, often sidelining technically skilled professionals.
Despite the perception that civil servants are underpaid, the study concluded that their overall compensation—including cash allowances and substantial in-kind benefits—often exceeds what is reflected on their salary slips. Higher-ranking officials benefit from perks that can increase their total compensation significantly. For instance, the provision of official vehicles and medical reimbursements further inflate the costs associated with civil servants.
