ISLAMABAD: The fede­ral government has increa­sed the salaries of government employees by 15 per cent and approved the merger of ad hoc allowances with their basic salary, Finance Minister Miftah Ismail announced during his budget speech on Friday.

“The country is witnessing the worst-ever financial crisis,” he noted while making the announcement. “However, the government is cognisant of the problems of government employees. Inflation has adversely affected the purchasing power of people in general, and the salaried class in particular.”

Mr Ismail said the government, despite its meagre resources and extreme financial constraints, was intent on protecting government employees from the effects of inflation.

The merger of ad hoc allowance had been a longstanding demand of the government employees. According to experts, the merger will boost employees’ take-home salary and pensions and enhance those allowances and perks that are pegged to basic pay. These include house rent, transportation and medical allowances.

A sum of Rs530 billion has been set aside in the budget for pensions of retired employees, including armed forces retirees. The finance minister said that, following the example of other countries, the government has also established a pension fund. An amount of Rs10 billion has been allocated to it.