The federal cabinet has approved a new Rs1.8 billion special allowance for senior bureaucrats, despite extending austerity measures for the 2026-27 fiscal year and announcing only a 7% salary increase for government employees. The decision has sparked debate over public sector pay disparities during a period of economic pressure.

The newly introduced benefit, titled the All Pakistan Services (APS) Provincial Governments’ Cadre Posts’ Parity Allowance, is the second special allowance granted to top bureaucrats in the past four years. It follows the 150% executive allowance approved in 2022 for officers serving in key federal positions. The latest allocation of Rs1.8 billion will take effect from July 1, with the allowance expected to amount to at least 100% of an officer’s basic pay.

Government sources said the measure is intended to reduce disparities between officers serving in the federal and provincial governments and encourage senior officials to take up federal postings. However, critics argue that introducing another special allowance without broader civil service reforms could further widen pay inequalities within the public sector.

Alongside the allowance, the cabinet extended austerity measures, including restrictions on new vehicle purchases, creation of posts, and nonessential foreign travel. However, exemptions may still be granted on a case-by-case basis by the Finance Division’s Austerity Committee.