The Federal Cabinet of Pakistan has approved a 7% increase in salaries for government employees and a matching 7% rise in pensions for retired public servants in the budget for fiscal year 2026-27.
The decision was made during a special cabinet meeting chaired by Prime Minister Shehbaz Sharif on June 12, 2026, in Islamabad. Finance Minister Muhammad Aurangzeb is expected to present the full budget in the National Assembly soon.
This hike aims to give financial relief to millions of government workers and pensioners facing rising living costs. The cabinet also approved merging previous ad hoc relief allowances (15% from 2022 and 10% from 2025) into the basic pay. This change will benefit employees in the long term by including these amounts in their pensionable salary.
According to budget documents, the government has also proposed a 10% increase in the minimum wage.
Prime Minister Shehbaz Sharif thanked coalition partners and noted the support of the International Monetary Fund (IMF) in preparing the budget. Cabinet members expressed hope that these steps will help maintain economic stability while supporting public sector workers.
This announcement comes as the government works to balance fiscal challenges with the needs of its employees. The new rates are likely to take effect from July 1, 2026, once the budget is passed.
