The Ministry of Finance dismissed reports indicating the government plans to cease the payments of salaries and pensions.

"There are rumours floating around that government has instructed to stop payment of pay, pension, etc. This is completely false as no such instructions have been given by Finance Division, which is the concerned federal ministry," the ministry said in a statement on Saturday.

It added that the Accountant General Pakistan Revenues (AGPR) has confirmed that salaries and pension have already been processed and will be paid on time. "Further, other payments are being processed as per routine."

'No subsidies for wealthy': IMF 'very clear', wants Pakistan's poor protected

The development comes as Pakistan’s economy is witnessing one of its worst crises in decades, as the country’s foreign exchange reserves remain at a critically low level. Meanwhile, authorities remain busy trying to revive the stalled Extended Fund Facility (EFF) programme of the International Monetary Fund (IMF).

Pakistan’s finances have been wrecked by years of financial mismanagement and political instability – a situation exacerbated by a global energy crisis and devastating floods that left a third of the country under water last year.

The South Asian country is deeply in debt and needs to introduce tough tax and utility price increases to unlock another tranche of a $6.5 billion IMF bailout and avoid defaulting.

This week the government raised taxes on luxury imports and services – saying only the rich elite would be affected. However, it also increased fuel prices and increased a general sales tax, both of which will hit low-income families.