ISLAMABAD - The government may turn down the Senate’s proposal of 10 per cent increase in the salaries of all government employees as interim relief allowance due to the tight fiscal space.

The Senate in its proposals on Supplementary Finance (Second Amendment) Bill 2019 has recommended the National Assembly 10 per cent raise in the salaries of all government employees as interim relief allowance. However, sources in Ministry of Finance said that government is not in position to increase salaries of civil servants. “Prime Minister will take the final decision in consultation with finance minister,” said an official of the ministry. He further said that government was currently working to restrict the budget deficit by controlling expenditures.

The government, he said, had already given massive relief to the salaried class by increasing the minimum threshold of income tax. The previous government had granted exemption of income ceiling up to Rs1.2 million from Rs400,000 per annum in the annual budget for the ongoing fiscal year. The downward revision in minimum threshold of annual income tax slab is one of the reasons behind massive shortfall of Rs191 billion in tax collection during first seven months (July to January) of the ongoing fiscal year. The FBR has collected Rs2.06 trillion during July to January period of the year 2018-19 as against Rs1.995 trillion of the corresponding period of the previous year showing growth of 3 per cent.

Another official said, “The government will consider the increase in salaries in the budget for next fiscal year 2019-20”. He further said that government is already following an austerity plan to control the soaring expenditures of the country to restrict the budget deficit.

The Senate in its recommendations on Supplementary Finance (Second Amendment) Bill 2019 had proposed the government to increase salaries of the civil servants to offset the impact of the soaring inflation. Pakistan’s annual inflation rate jumped to 7.19 per cent in January, the highest in four and half years, due to the economic policies of the incumbent government. Inflation has increased due to government’s economic policies including increasing power and gas prices, devaluing the currency, borrowing from the central bank and taxing imported commodities.

It is worth mentioning here that Senate had adopted about 55 recommendations on the supplementary finance bill for further consideration of the National Assembly. The Senate had recommended for a reduction in tax on per kilogram tobacco saying the enhancement of tax has devastated the growers, local manufacturers and small enterprises related to the tobacco. It had proposed that non-filers should be allowed to purchase vehicles only up to 800 CC against the proposed exemption of up to 1300CC in the money bill. It said that the government should continue to impose regulatory duty on export of recycled materials in order to consider not allowing Pakistan as dumping ground for hazardous metals.