- Military incentives, pensions reforms under discussion.
- The RS17.5TR budget projected as SBP entries drop.
- TPS on cars can increase, electric vehicles to stay exempt.
Islamabad: In the midst of close budgetary constraints imposed by the International Monetary Fund (IMF), the government weighs an increase of 5% to 7.5% of wages and pensions for public sector employees in the upcoming budget, The news reported.
The Pakistan Peoples Party (PPP), a key coalition partner, urged the government to bring this figure to 10%, either during the budgetary announcement, or from its parliamentary adoption for exercise 2025-26. The proposal was also shared with the IMF for examination.
In addition, the government examines the proposals to provide additional incentives to the armed forces, including a possible conversion of the risk allowance in a retirement allowance.
However, no final decision has been made on the question whether the armed forces will be included in the defined contributory pension scheme (DCP), which should come into force from July 1, 2025.
The DCP for civilian employees has already been implemented during the current financial year. The government plans to introduce new retirement reforms in the coming budget, with important measures already in place and more strict stages likely to follow.
For civilian employees, there is a proposal to introduce an disparity allowance of 30% for those from BS-1 to BS-16. In addition, two ad hoc compensation which were previously excluded from the basic salary are being examined, including one likely to be merged into the basic remuneration structure.
The Ministry of Finance prepared several scenarios to present to the federal office, led by Prime Minister Shehbaz Sharif, for final approval on June 10, 2025, before the budget announcement. These proposals include a salary increase from 5% to 7.5%, taking into account inflationary pressures reduced during the outgoing financial year. The financial impact of these adjustments has also been calculated and will be shared with the firm.
The total federal budget for 2025-26 is scheduled for RS17.5 Billions, down compared to RS18.87 Billions the previous year, mainly due to the drop in tax without tax, in particular the State Bank of Pakistan (SBP) following the drop-down policy rates.
Non -tax income should go from Rs 4.85 Billions to Rs3 and RS3.5 Billion in the upcoming budget. On the expense side, the debt service – the largest budget element – should go from RS9.775 Billion to the initial estimates of the last budget to RS8.1 Billion in the new budget. Revised estimates for the exercise costs for the exercise leaving the debt service costs at 8.7 rumber of rupees by the end of June 2025.
On the revenue front, the Federal Board of Return (FBR) received a goal from RS14.14 Billion for the next financial year, compared to the revised estimate of RS12.33 Billions for the current year.
The rationalization of prices on imports is expected, which could result in a loss of income of 150 billion rupees at 200 billion rupees during the next financial year. Sectors such as steel, automotive parts and tiles are probably the most affected because they have higher seizure costs.
For example, the manufacturers of tiles argued that electricity and other entry expenses took them to a disadvantage of 55 to 60% compared to regional competitors.
The steel industry has raised similar concerns, criticizing British economist Stefan Dercon for having pretended to grasp the complexities of the commercial environment in Pakistan. They argue that uniform policies between sectors may not be effective.
For employees, a reduction in tax rates in various income tiles is being studied. Midders earning revenues abroad can also be introduced into the tax net, the SBP helping to identify foreign transactions.
The government explores the means to promote digital payments while considering taxes on digital services and income from social media platforms.
No modification is expected in terms of taxation for electric vehicles, fertilizers, pesticides or bakery and confectionery items. However, TPS on locally manufactured cars can drop from 12.5% to the standard rate of 18%.
Tax exemptions for the old Fata / Pata regions can be removed, although lobbying efforts are underway to extend them for another year. A reduced GST rate by 12% for these regions is also taken into account.
The government has proposed a drop in tax rates for deductions for sellers and buyers, but the IMF has not yet approved this. Meanwhile, the Federal Right of Incisse (Fed) on the property should be abolished. Capital gains tax can be increased for actions and goods, with inflation adjustments.
For cigarettes and drinks, tax discounts are taken into account in various categories, including related products.