The appointment of the national pay commission by the interim government to fix pay hikes for the public servants over the next six months has surprised economists amid chronic revenue shortfalls, growing government borrowings, and elevated inflation.
Economist have expressed worries that the proposed pay hikes for around 18 lakh public officials and employees would increase money supply on the market and put majority people outside the public pay scales into problems, including hardship.
The increased money supply will have an inflationary pressure, said Center for Policy Dialogue executive director Fahmida Khatun on Saturday.
Besides, the traditional practice of raising prices of essentials and house rent on the ground of public pay hike will render the private sector employees in distress, noted that the CPD executive director.聽
Former finance secretary Zakir Ahmed Khan, who will head the new pay commission, has been asked to submit the commission recommendations within the next six months.聽
While announcing the government decision, the chief adviser鈥檚 press secretary told reporters that pay hikes for the public officials were necessary for checking the inflation prevailing over 10 per cent on average for the past two years.
The formation of the new pay commission came less than a month after the interim government introduced a special financial incentive for the public sector employees and pensioners on July 1.
Employees in Grades 1 to 9 have been given a salary increase by 10 per cent of their basic pay maturing on July 1 every year, while those in Grades 10 to 20 received a 15 per cent raise.
鈥楴ot all people are public officials and employees,鈥� said the CPD executive director.
Economists said that the government had failed to ensure salary hikes in the private sector matching with the pay hikes for public sector over the past years, especially in 2015 when the public sector salaries saw an almost 100 per cent increase.
The 鈥榃hite Paper on the State of the Bangladesh Economy鈥�, which was submitted to the interim government in past December, criticised the 2015 pay hikes, describing those as an attempt to appease the bureaucracy following the controversial 2014 Jatiya Sangsad elections.
The white paper, prepared by a team of economists led by Dr Debapriya Bhattacharyia under a policy of the聽 interim government, noted that that the pay hikes, coupled with low revenue generation, had contributed to a growing public debt and rising interest payments on the loans.
Both formal and informal sub-sector employees in the private sector, accounting for over 85 per cent of the country鈥檚 workforce, have been facing serious financial woes for the past three years amid the persisting high inflation.
Referring to the wage rate increase that has remained below the rate of inflation, economists noted that many people were falling below the poverty line.
In its Bangladesh Development Update released in April, the World Bank warned that an additional 30 lakh people in Bangladesh were expected to fall into extreme poverty in 2025.
The extreme poverty rate was projected to rise from 7.7 per cent to 9.3 per cent, said the Washington-based multilateral lender.
The International Monetary Fund, which has been giving Bangladesh loans under a $4.7 billion credit programme, has forecast that the current double digit inflation would come down in 2026.
The IMF, however, suggested higher revenue mobilisation to contain government borrowing in order to maintain the fiscal expenditure stable.
Former Bangladesh Bank governor Mohammed Farashuddin said that a successful implementation of the new pay commission recommendations would depend on a higher revenue mobilisation.
National Board of Revenue chair Abdur Rahman Khan stated that the board had collected revenue to the tune of Tk 3,68,177 crore in FY2024-25 against the revised target of Tk 4,63,500 crore.聽
Without generating a sufficiently higher volume of revenue, the government will have to depend on borrowing to implement new pay hikes, noted the former BB governor.聽
Also chair of the 2015 national pay commission, Farashuddin said that the government borrowing had already become a headache for maintaining fiscal spaces.聽聽
Meanwhile, about Tk 1.22 lakh crore has been allocated for interest payment in the budget for the current financial year of 2025-26, which will account for at least 15.44 per cent of the overall Tk 7.9 lakh crore budget outlay, up from 14 per cent in the previous budget.
Economists further observed that the growing public borrowing from banking sources caused the crowding-out effect for the private sector, the main source for creating employment.
M Masrur Reaz, chair and chief executive officer of the Policy Exchange Bangladesh, said that the formation of the national pay commission was not critical at this stage.
The interim government had many other tasks to accomplish, he observed.