THE interim government鈥檚 instituting a national pay commission to decide on an increase in the salary of public servants in six months has come as a surprise to economists, especially amidst a chronic revenue shortfall, growing government borrowing and increased inflation. The pay commission has come in less than a month after the interim government introduced a special financial incentive for employees and pensioners in the public sector on July 1. Employees from Grade 1 to 9 have been given a salary increase by 10 per cent and from Grade 10 to 20 by 15 per cent of the basic salary maturing every July 1. The government earlier in 2015 increased the salary of public servants by almost 100 per cent, which the White Paper on the State of the Bangladesh Economy, submitted to the government in December 2024, criticised, noting that it could be an attempt at appeasing the bureaucracy after the controversial holding of the 2014 national elections. The white paper also says that the salary increase, coupled with low revenue generation, has contributed to a growing public debt and rising interest payment on the loans.
Keeping to the practice of salary increase every 10 years, the interim government has instituted the pay commission for an increase in the salary of 1.8 million public servants, but the government does not seem to be lifting a finger for more than 8.5 million people employed in formal and informal sub-sectors in the private sector who have faced serious financial woes for more than three years because of the persistent high inflation. Whilst a former Bangladesh Bank governor says that a successful implementation of the pay commission recommendations would depend on a higher revenue mobilisation, the revenue board chair has said that they collected Tk 3681.77 billion in revenue in the 2025 financial year against the revised target of Tk 4635 billion. The former central bank governor, who was chair of the 2015 pay commission, says that the government borrowing has already become a headache, especially in maintaining fiscal spaces. Besides, about Tk 1,220 billion has been set aside for interest payment in the 2026 budget which will account for at least 15.44 per cent of the Tk 7,900 billion budget outlay, up from 14 per cent in the preceding budget. A growing public borrowing from the banking system has also crowded out the private sector, the prime source for job creation. The increased money supply would also have an inflationary pressure and the practice of increase in goods prices and house rent premised on the increase in public-sector pay would put people in the private sector in distress.
Whilst the government has many other chores to do to improve pay in the private sector, it appears that it needs to tread a tightrope in moving forward with the pay increase in the public sector.