Budget 2026: Grades 1-16 set for Bigger Salary Hike than Grade 17 and above

ISLAMABAD – Pakistan’s federal government is considering a major shift in salary policy for Budget 2026-27, with lower-grade employees expected to receive larger pay raises than senior officers as part of efforts to provide targeted relief against inflation. Federal employees could see a revised salary structure in Budget 2026-27 as the government considers two-tier pay increase formula that would offer greater relief to lower-grade workers. Employees in Grades 1 to 16 are likely to receive higher salary increase, while officers in Grades 17 to 22 may get a comparatively smaller raise. The proposal is aimed at supporting lower- and middle-income government workers who have been disproportionately affected by rising inflation and living costs. While discussions are still ongoing, sources indicate that an overall salary increase of around 7 percent is under consideration. However, if the differential formula is approved, the increase for Grades 1-16 could exceed the rate proposed for Grades 17-22, allowing the government to channel more resources toward employees with lower income levels. The proposed pay package is expected to be finalized during special federal cabinet meeting ahead of the budget announcement. The government is preparing an estimated Rs18 trillion federal budget for the 2026-27 fiscal year amid ongoing fiscal and economic challenges. In addition to the salary proposal, authorities are reviewing potential income tax relief for salaried individuals earning between Rs1.2 million and Rs2.4 million annually, a move aimed at easing the burden on middle-income taxpayers. Meanwhile, the government is also considering new revenue measures worth Rs220 billion to meet fiscal targets. Policymakers are evaluating the possibility of reducing the super tax while keeping the corporate tax rate unchanged. The budget discussions also come against the backdrop of rapidly increasing pension liabilities, with pension expenditures projected to exceed Rs1.1 tr