IMF Agrees to Conditional Relief for Salaried Class in Budget 2025-26

In a significant development ahead of the 2025-26 federal budget, the International Monetary Fund (IMF) has conditionally allowed the Pakistani government to offer relief to the salaried class. However, this relief comes with strings attached — the lost revenue must be recovered through alternative measures, including the controversial possibility of taxing pensioners.

Economic analyst Shahbaz Rana, appearing on SAMAA TV’s Red Line with Talat, confirmed that Prime Minister Shehbaz Sharif and Finance Minister Muhammad Aurangzeb are exploring ways to ease pressure on the salaried segment despite limited fiscal space. Over the past 10 months, salaried individuals have contributed Rs437 billion in income tax.

While a 10% salary increase for public sector employees is under consideration, the final structure of the tax relief remains uncertain. The IMF reportedly has not objected to Pakistan’s defense budget but is focused on revenue generation to cover expenditures.

Rana also highlighted ongoing negotiations with the IMF under tough conditions — nearly 50 in total — many of which influence key budgetary and structural reform decisions. One sensitive issue is the demand for an alternative banking framework in response to Pakistan’s ongoing transition away from an interest-based financial system, as per a Federal Shariat Court ruling.