Government employees' pay is recommended to be ramped up by 142 per cent to Tk 160,000 at the highest and Tk 20,000 lowest, generating dismay among economists.
The Pay Commission submitted its report to Chief Adviser of the interim government Prof Muhammad Yunus on Wednesday, recommending such salary rises.
Commission chairman Zakir Ahmed Khan and other members handed over the report to the Chief Adviser at his office.
The last pay scale was implemented in 2015
Chief Adviser's Press Secretary, Mohammad Shafiqul Alam, in his verified page shared a brief containing the recommended wage scale which kept the number of grades unchanged in the public-sector jobs.
The commission recommends that the starting basic pay of a 20-grader employee will be Tk 20,000 in a raise from the existing Tk 8,250, marking more than 142-percent hike.
On the other hand, a grade-1 employee will get Tk 160,000 (fixed) under the new pay scale, as recommended, in a rise from the existing pay of Tk 78,000 (fixed), which comes to 105-percent hike.
The starting basic pay of a grade-2 employee is recommended to be Tk 132,000 from the present pay of Tk 66,000 in a cent-percent pay increase.
The commission also suggests adjusting the special allowances given to employees in different grades at 10 to 15 per cent when the new pay scale comes into effect.
Sources have said apart from the proposed pay hike, the commission recommended raising "Bashakhi allowance" to 50 per cent from existing 20 per cent.
Also, the commission suggests raising pensioners' payment significantly- a rise between 55 per cent and 100 per cent-based on the amount they presently draw.
Moreover, the commission recommends Tk 10,000 monthly medical allowances for pension-holders aged over 75 from the existing Tk 8,000.
Finance Adviser Dr Salehuddin Tuesday refrained from making it clear from when the new pay scale will be effective. He said a number of committees would scrutinise the report before final approval for its implementation.
However, finance ministry officials say they have allocated some Tk 360 billion extra in the revised budget of the current fiscal year as there is a possibility to implement the new pay scale partially with effect from January 1.
According to them, a full-fledged implementation of the new pay hike may cost some Tk 800 billion or around 11 per cent of total fiscal budget of the country and some 14 per cent of revenue budget.
Such a steep pay-hike recommendation raised eyebrows among economists, especially because of the current economic situation and elevated inflation. They think financing will be a tough job for the government with tiny revenue earnings.
"Implementing the new pay structure would inject a large volume of money into the market, stoking inflation and putting pressure on people's living standards, while also triggering wage-hike demands in the private sector and creating broader strains on the economy," says Dr Zahid Hussain, a former Lead Economist at World Bank Dhaka Office.
He also observes that the government currently lacks the fiscal capacity to implement the proposed pay structure.
Speaking to The Financial Express, he said full implementation of the proposed pay scale would require a large sum each year.
There are two ways to finance the new pay scale-either through higher revenue mobilisation or by cutting expenditure in other areas, he notes.
"Revenue mobilisation in Bangladesh has historically been low, and very few recent efforts in this regard have succeeded. Financing the pay scale through a further 25-percent increase in revenue mobilisation is not feasible," says Mr Hussain.
On the other hand, the government has little scope to reduce spending in other areas, he adds, noting that allocations under the Annual Development Programme (ADP) have already declined significantly.
Cutting development expenditure would also have serious negative consequences for private-sector investment, income, and people's livelihoods, he cautions.
Dr Mustafizur Rahman, a Distinguished Fellow at the Centre for Policy Dialogue (CPD), says the newly proposed pay scale would not significantly raise the real income of public servants, given the sharp increase in living costs over the past decade driven by inflation.
He suggests the government should adopt a clear plan with a defined timeline to mobilise the additional resources required to implement the new pay scale sustainably.
"Alongside salary increases, ensuring transparency, accountability and efficiency in public service delivery is essential," he says, adding that officials at the National Board of Revenue (NBR) must act proactively to strengthen resource mobilisation.
Failure to mobilise sufficient revenue would force the government to rely on borrowing to finance the pay scale, creating pressure on fiscal management and fuelling inflationary risks, the economist warns,
Dr M Masrur Reaz, Founder and CEO of Policy Exchange Bangladesh, says public-sector salaries should be increased to motivate employees, as there is a significant gap between public-and private-sector pay. However, such a move requires careful planning, and now is not the appropriate time.
He notes that raising salaries would require an additional Tk 800 billion-nearly 11 per cent of the national budget-at a time when the country is trying to recover from macroeconomic challenges. Economic growth has slowed, significantly affecting revenue collection.
"This revenue mobilisation will be very difficult, as the National Board of Revenue (NBR) already faces a shortfall of over Tk 460 billion," he predicts.
He also highlights that the country is grappling with high inflation, which has persisted over the last three months.
"While other countries-whether developed or developing-often adopt austerity measures when facing similar economic challenges, our government has to opt for delayed implementation rather than immediate action," he concludes.
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