Revising the pay scale for public sector employees was due. It has been a decade since the last revision was made. A revision has therefore become necessary, as inflation has been high for some time now. Public servants working across various government departments should be compensated fairly, and we need to remain sensitive to this fact. Hence, the pay scale revision is arguably necessary at the moment. Government employees are also putting pressure on the interim government for a new pay scale.
The real challenge, however, lies elsewhere: if salaries are increased as recommended — by up to 142 percent — where will the government find the additional funds? This is critically important. At present, the government’s fiscal capacity is extremely limited. For several years now, it has been borrowing simply to repay existing loans. On top of that, the entire development budget is financed through borrowing. Revenue collection has not improved. I hope the commission, in its final report, will also specify how the required funds can be mobilised. It will be interesting to see whether the commission also considered the public administration reform proposals aimed at improving governance and public service delivery, as it examined the case of revising the public service pay scale, financed either by taxpayer money or public debt. Has the commission conducted an analysis to determine why, following the previous pay scale revision and a record increase, the tax-GDP ratio continued to decline while corruption simply expanded, and what lessons have they taken from preparing their proposals?
Bluntly speaking, the government's financial capacity today resembles that of a lower-middle-class household head—surrounded by numerous legitimate demands and being sincere about meeting them, but lacking the means. The larger question is: how realistic is it to fulfil such demands without the necessary financial strength? The tax-GDP ratio is currently at an all-time low, while debt stress is more real than ever. Apparently, the tax collection shortfall may hit the highest mark at the end of this fiscal year. Debt and debt servicing are also increasing at a faster rate in recent years.
Even during the previous major revision of the pay scale, many of us considered the reform reasonable. But crucial questions remained: Would the changes improve government efficiency? Would public service delivery become better? Would corruption decline? Responses to these three questions can be assessed through various indicators, including citizens' daily experiences. These responses help determine whether the productivity of the civil service has increased and whether there has been a reduction in corruption.
At the same time, there are other futuristic questions critical in making decisions regarding public pay scale revision. Could we expect higher-quality, better-governed services following the revision? Would the persistent allegations of wastage in project implementation decrease? Will the upward revision of the pay structure be accompanied by a reduced size of government administration so that total expenditure under this head does not increase drastically? Has the commission report considered these?
If salary increases are funded through higher borrowing, this may lead to higher inflation, reduced private-sector investment capacity, and a longer delay in resolving the government’s inability to adequately fund the other key sectors and priorities. This will also make it harder for political parties to implement the promises they are now making ahead of the general election scheduled to be held on February 12.
Under these circumstances, it would be unreasonable for a caretaker or interim administration—at the very end of its term—to take such a far-reaching decision. Before making a decision just days before the national parliamentary elections, there should have been a series of consultations with political parties.
After all, the consequences of such a decision will fall squarely on the elected government.
Political parties should therefore include this issue in their election manifestos and place it before the public. If the electorate endorses them, the revised pay structure can then be implemented retrospectively (for instance, from January of the current year). A pragmatic approach to this end would be to set a phased revision that is subject to improved productivity of public servants and the availability of funds. This will establish an accountability framework for the public administration as well.
Towfiqul Islam Khan is additional director, research, at the Centre for Policy Dialogue
