ISLAMABAD:The federal government is likely to raise the salaries of government employees by 10 percent in the upcoming Budget 2025-26, which is expected to be presented on June 10.
According to reports, the government is holding discussions with the International Monetary Fund (IMF) to provide relief to the salaried class. A special committee has also assured government employees that their demands—such as pension reforms and salary increases—will be included in the new budget.
A key meeting of the special committee was held in Islamabad. The meeting was chaired by Minister for Parliamentary Affairs Dr. Tariq Fazal Chaudhry, and attended by officials from the Ministry of Finance, Ministry of Law and Justice, Establishment Division, and leaders of the All Government Employees Grand Alliance (AGEGA), including Chief Coordinator Rahman Bajwa.
The meeting reviewed the progress on the written agreement between the government and employees. Rahman Bajwa told the media that Dr. Tariq Fazal and other ministers have assured them that all agreed demands will be met, including leave encashment and the Prime Minister’s relief package.
Another meeting on leave encashment will be chaired next week by Rana Sanaullah.
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Bajwa added that employees from across the country will gather in Islamabad on budget day to ensure the government fulfils its promises. He said that if the agreement is implemented, government officials like Dr. Tariq Fazal and Rana Sanaullah will be honored. Otherwise, they will also be asked to join the protest.
In a related development, the government is also exploring ways to offset the financial burden of these relief measures. As part of its discussions with the IMF, the Federal Board of Revenue (FBR) is considering a 2 percent increase in the tax rate on income earned from bank deposits and savings schemes.
This proposed tax hike would apply to both filers and non-filers. Currently, interest income is taxed at 15% for filers and 35% for non-filers. If approved, these rates could go up to 17% and 37%, respectively.
Officials say the IMF has not yet given final approval to this proposal but has asked for details on how the government plans to compensate for the loss in revenue due to salary and pension increases.
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Tax experts have warned that increasing taxes on profit from deposits could hurt people who depend on savings income, especially retirees. Former FBR tax policy member Dr. Muhammad Iqbal said that many individuals already pay taxes when they earn the money they deposit in banks. He also said that this tax will make life harder for the middle class and could reduce the funds banks receive from depositors.
Iqbal also questioned why the government is considering raising this tax when dividend income is still taxed at 15 percent, calling it an unfair move.
