• Finance minister says IMF consultations ongoing on all fiscal decisions
• Super tax exemptions will be extended to export sector
• Calls for revisiting population factor in provincial NFC shares
• Contributory pension scheme for armed forces further delayed
ISLAMABAD: Amid substantial salary-related relief measures for all government employees and further delays in the contributory pension scheme for armed forces personnel, Finance Minister Muhammad Aurangzeb on Saturday said additional funds from a three-year arrangement involving provincial grants to the Centre would be used for “pressing strategic needs,” including defence and second- and third-round spillover effects of the regional conflict.
Speaking at his post-budget press conference, the finance minister said the government was in constant consultation with the International Monetary Fund (IMF). He added that the prime minister had directed that super tax exemptions be extended to the entire export sector. The finance ministry, he said, would take this forward and include it in the winding-up speech on the budget.
He emphasised that since the country remained under an IMF programme, “we remain in constant consultation with them. All discussions are being carried forward with their input. That is a requirement of being in the Fund programme as well”.
Responding to a question, the finance minister said the additional resources provided by the provinces as grants to the Centre under Article 164 of the Constitution would be utilised in part for the defence sector. He said the arrangement was for three years and discussions with the provinces would continue over the next couple of years. He added that a portion of these funds had been set aside for second- and third-order impacts of the US-Iran conflict.
The minister said the petroleum levy on oil products would not be used, even though the collection target was higher by around Rs2 trillion. “We keep on interchanging the amount between petrol and diesel, but there is no proposal to increase it,” he said, adding that while Pakistan wished the Middle East conflict would end soon, its impact would spill over into the next fiscal year even if it ended today. Therefore, he said, “whether it is supply or prices, we have built in that redundancy into our fiscal position for the next year”.
In reply to a question, Finance Secretary Imdad Ullah Bosal said the 7pc salary increase would apply to the running basic pay after the merger of ad hoc relief allowances of 2022 and 2025. He said a detailed pay scale package would be introduced with effect from July 1, 2026. The increase would apply only to those corporations and SOEs that had adopted government pay scales, while others had their own pay structures.
Contributory pension scheme
An official said the contributory pension scheme for armed forces personnel, which had been postponed two years ago, had been delayed further.
The government announced in 2024 a contributory pension fund scheme would be introduced for all civil employees of federal government, including civilian employees paid from defence estimates appointed on a regular basis on or after July 1, 2024. A September 2024 notification stated that the scheme would also apply to armed forces personnel appointed on or after July 1, 2025.
While the civilian side of the scheme has been implemented, it was deferred for a year to 2026 due to concerns over the peculiar nature of armed forces’ duties requiring detailed review, according to earlier statements by the finance minister and secretary.
Under relief measures, the pay scales 2026 will be introduced by merging Ad hoc Relief Allowance-2022 at 15pc of basic pay and Ad hoc Relief Allowance-2025 at 10pc of basic pay, with certain conditions, followed by a 7pc ad hoc allowance on running basic pay for all federal employees. The package includes a Disparity Reduction Allowance at 15pc of basic pay as on June 30, 2022, extended to employees in BPS-1 to 22 on existing terms and conditions for those already receiving the allowance.
The conveyance allowance has also been increased to 50pc of the existing amount under current terms. The constant attendant allowance for civil armed forces has been raised to Rs30,000 per month from Rs7,000. Similarly, the Special Area Compensatory Allowance (SACA) has been revised for coast guards troops at 10pc of BPS 2015, matching the rate being paid to FC, Balochistan.
The existing SACA at 40pc will be discontinued, while 100pc IMPAS allowance on running basic pay as of June 30, 2026 for the Immigration & Passport Department will be frozen.
Moreover, special pay for officers and staff of the cabinet and cabinet committees’ wings of the Cabinet Division will be increased from Rs6,000 to Rs20,000 per month. A special NACTA/NIFTAC allowance at 150pc of basic pay as on June 30, 2025 has been granted, replacing the discontinued 100pc risk allowance. The executive allowance will be stopped forthwith as it is not authorised for that office.
‘Economy on growth path’
The finance minister defended the budget measures, saying they marked a significant step towards placing the economy on a growth path. He said the government had made comprehensive efforts to create an enabling environment for export-led growth, without which Pakistan could not avoid IMF programmes.
He added that the decision to reduce super tax for businesses earning more than Rs500 million represented a “meaningful direction of travel” towards shifting from stabilisation to growth.
Mr Aurangzeb also said automation and AI-driven processes would be introduced in the taxation system to reduce human intervention. He called for revisiting the population factor in provincial NFC shares, saying it needed to be reviewed and changed. Speaking on tariffs, the finance minister noted that the government was in the second year of a five-year plan to reduce costs of intermediate goods and raw materials.
Minister of State for Finance Bilal Azhar Kayani described the financial plan as a “budget of the salaried class, industrialists, exporters, construction sector, and those building their homes”.
He said salaried class remained at the top of the tax burden list, adding that available fiscal space had been used to provide relief to lower-income groups and extend benefits to the next tier so that taxpayers could feel a meaningful reduction in burden. He added that abolishing advance tax for exporters and reducing six slabs of super tax were key demands of exporters and formal industry and had been well received.
Published in Dawn, June 14th, 2026