Pakistan's new government, grappling with soaring inflation and political unrest, is set to raise the salaries and pensions of current and former government employees.
The federal cabinet on Friday approved a 15% increase in the salaries of the federal government employees and a 5% increase in pensions, reports Geo News citing sources familiar with the matter.
Interestingly, the decision came less than an hour before the Prime Minister Shehbaz Sharif-led government unveiled its first budget of $47 billion for the next fiscal year.
The nation of 220 million people is facing a balance of payments crisis, with foreign reserves falling below $10 billion, hardly enough for 45 days of imports, and a widening current account and ballooning fiscal deficits.
Information Minister Marriyum Aurangzeb took to Twitter and said: "The Prime Minister has rejected the Finance Ministry’s proposal of a 10% increase and has approved an increase in government employees’ salaries of 15% with the consent of the cabinet."
She added that the adhoc allowances have also been merged into the basic pay.
Sources said that the recent rise in salaries of the government employees will put a burden of $351 million on the national exchequer.
The cabinet on Friday met to review the budget proposals. Following the approval of the cabinet, the budget was supposed to be tabled in the National Assembly – the lower legislative house of the country’s bicameral parliament – by Finance Minister Miftah Ismail on Saturday.
A day earlier, Ismail announced that Pakistan and IMF agreed to increase the salaries of employees. He, however, said that the salaries of government employees will be increased as per the economic situation of the country.
The budget was announced earmarking more than 40% to service the country's massive foreign and domestic debt.
Prime Minister Shehbaz Sharif blames Pakistan's economic woes on his predecessor Imran Khan, who was ousted by a parliamentary vote of no confidence in April and is fomenting a national campaign to press for early elections.
Analysts, however, say the problems stem from decades of poor economic management by successive governments and military rulers who have failed to tackle endemic corruption and widespread tax avoidance.
The budget unveiled by Finance Minister Miftah Ismail Friday earmarks $50.55 billion just to service the country's whopping debt of $128 billion.
A $6 billion IMF bailout package signed by former prime minister Khan in 2019 has never been fully implemented because his government reneged on agreements to cut or end some subsidies and to improve revenue and tax collection.
Islamabad has so far received $3 billion, with the programme due to end later this year.
Officials are seeking an extension to the programme through to June 2023, as well as the release of the next tranche of $1 billion.