ISLAMABAD, Sunday, April 17, 2011: The government has no plans to increase salaries and pensions of government employees in the next budget because of tight fiscal position and to absorb the impact of ‘unreasonable 50 per cent raise’ allowed last year.
A senior finance ministry official told Dawn that the government had been considering for more than six months trimming down the 50 per cent salary and pension increase by half as part of budget restructuring as fiscal deficit started to shoot up, but could not make up its mind because of political reasons. Obviously there is no proposal under consideration to increase salaries and pensions in the next year’s budget, he added.
He pointed out that the pay and pension raise allowed last year put an additional burden of more than Rs100 billion on the exchequer, a major contributing factor in the higher fiscal deficit during the current financial year.
The official recalled that the government had increased wheat support price from Rs650 per 40kg to Rs950 per 40kg in just one year and then had to put a freeze on it for next two years to phase out the ‘irrational’ increase.There is no doubt in the finance ministry that the salary increase too has to be gradually adjusted to ease out financial pressure, he added.
He said that even if the rate of inflation was factored in, the increase in salaries already allowed had more than taken care of the impact of general pricing trend during the year.The next financial year will remain in the stabilisation mode and hence the government will not risk adding financial pressure.
It would be the first time in more than a decade that the salary budget would remain frozen in real terms at the previous year’s position. Every year, the government has been increasing salaries by 10-15 per cent in the form of dearness allowance, ad hoc allowance or increase in basic salaries but last year it allowed a 50 per cent increase.
In September 2010, the finance ministry had proposed cutting down government employees’ salaries by 25-30 per cent to accommodate additional pressure arising out of devastation caused by the floods. This could not materialise for unknown reasons although public sector development programme was cut by about 40 per cent.
Again in February 2011, the finance ministry discussed with the Pakistan Muslim League-N reducing salaries of grade 1722 officers by 25 per cent as part of broader dialogue on the 10point economic agenda, but the idea was shot down by the government’s political leadership.The expected savings under this head had to be replaced later with flood tax and power tariff increases.