New Delhi, Sep 10 - The dearness allowance of central government employees and pensioners has been hiked by five percent retrospectively from July 1, it was announced Thursday.

'The cabinet has decided to release an additional installment of dearness allowance to central government employees and dearness relief to pensioners with effect from July 1,' Information and Broadcasting Minister Ambika Soni said.

'This represents an increase of five percent over the existing rate of 22 percent of the basic pay or pension to compensate for the price rise,' she told reporters after a cabinet meeting presided over by Prime Minister Manmohan Singh.

The impact on the exchequer would be Rs.