Cabinet clears Rs1.8bn bureaucrats’ allowance

The federal cabinet has approved a new Rs1.8 billion special allowance for senior bureaucrats despite continuing austerity

The federal cabinet has approved a new Rs1.8 billion special allowance for senior bureaucrats despite continuing austerity measures and limiting the salary increase for government employees to 7% in the 2026-27 federal budget.

The decision was taken during the cabinet meeting that approved the federal budget in June. The new benefit is the second special allowance granted to top civil servants in the past four years. It comes at a time when the government is urging public institutions to reduce spending and maintain fiscal discipline.

The newly approved incentive has been named the All Pakistan Services Provincial Governments’ Cadre Posts’ Parity Allowance. It will be effective from July 1, 2026. The approved allocation of Rs1.8 billion indicates that the allowance could be close to 100% of an officer’s basic salary, although the government has yet to announce the final rate and eligibility criteria.

Officials have not publicly explained why the allowance was introduced or whether any formal study was conducted before approving it. Government departments also did not clarify the exact structure of the benefit.

According to officials familiar with the matter, the allowance is intended to reduce differences in salaries and benefits between officers serving in the federal government and those working in provincial governments. Authorities believe many senior officers prefer provincial postings because they receive better financial incentives and additional privileges.

The government also wants to encourage members of the Pakistan Administrative Service and the Police Service of Pakistan to continue serving in federal institutions by offering competitive compensation.

However, the decision has drawn criticism from observers who argue that the move increases inequality within the public sector. While senior bureaucrats continue to receive additional financial benefits, the majority of government employees have received only a modest salary increase despite rising inflation and increasing living costs.

Analysts believe the decision could encourage other civil service groups to demand similar allowances, putting additional pressure on the government’s finances and complicating future pay reforms.

The cabinet also approved a major revision to the 150% executive allowance introduced in 2022. Instead of calculating the allowance on the 2017 basic pay scale, it will now be based on officers’ current basic salary as of June 30, 2026. This change will substantially increase payments for officers serving in grades 17 to 22 across key federal institutions.

At the same meeting, the government extended austerity measures for another fiscal year. The restrictions include a ban on purchasing new vehicles and non-essential equipment, creating new posts, unnecessary foreign visits, and other non-priority expenditures. Government meetings and official events will continue to follow a simple catering policy.