The government is unlikely to implement the proposed pay hikes for public officials and employees in the current financial year ending in June as the ongoing war in the Gulf has left it in a tight spot.

Finance ministry officials said that there was an allocation over Tk 20,000 crore in the national budget for the 2025-26 financial year for dearness allowance for the government officials and employees, but the scope for providing it became dim amid the mounting pressure on the exchequer for subsidies for energy items.

In January, the National Pay Commission 2025 submitted its report, proposing pay hikes for government officials and employees, ranging from 100 per cent to 147 per cent. The full implementation of the proposed pay hikes will cost the government an additional amount of Tk 1.06 lakh crore.

In the current financial year of 2025-26, about Tk 1.31 lakh crore has been  allocated for salary and allowances of about 14 lakh government officials and employees and nine lakh retirees.

Supply disruption of fuel oils as well price hikes of the items on the global market by about 50 per cent due to the war that has started with the joint strike by the United States and Israel on Iran and retaliation by Tehran since February 28 straining the budget in the last quarter of the FY26.

The widening of the social safety net programme and the distribution of subsidised food for the poor against the backdrop of elevated inflation and the poor revenue incomes have eaten up the budgetary allocation for dearness allowance kept aside by the past interim government led by Muhammad Yunus amid pressure from bureaucrats.

Finance ministry officials calculated that over 60 per cent of the Tk 37,000 crore put aside for power subsidy had already been given to state-owned Power Development Board in the first eight months of the FY26.

They also said that demand for extra Tk 4,500 crore had been sought by another state-owned company, Petrobangla, against allocation of Tk 8,900 crore for importing liquefied natural gas.

On Sunday, finance and planning minister Amir Khasru Mahmud Chowdhury told reporters that pressures were mounting on the exchequer because of keeping the fuel oil prices unchanged on the local market.

On March 31, the government decided to keep the prices of diesel at Tk 100 a litre, kerosene at Tk 122 a litre, petrol at Tk 116 a litre and octane at Tk 120 a litre unchanged for April.

Former World Bank Dhaka Office chief economist Zahid Hussain said that even the partial implementation of the proposed pay scale amid the war would create extra pressure on the fiscal side.

Besides the possible pressure on the fiscal side, the implementation of the proposed pay scale may cause price hikes of essentials amid the elevated inflation that was over 8 per cent in March.

The money supply will go up for the partial implementation of the pay hikes, said M Masrur Reaz, chairman and chief executive officer of the Policy Exchange Bangladesh.

The domino effect of the partial pay hike for government officials and employees accounting for less than 2 per cent of the country’s overall workforce of over 7.7 crore would be critical, said economists.

About 85 per cent of the workforce employed in the informal sectors has been facing hardship as the wage rate increase had been trailing the inflation for the 46th month in December 2025.

The current pay structure for the government officials and employees implemented in two phases in 2015 and 2016 by the Awami League regime, which was ousted in August 2024 in a mass uprising, had put heavy pressure on the budget implementation amid low revenue incomes.

The previous pay hikes, coupled with low revenue generation, had contributed to a growing public debt and rising interest payments on loans, according to a white paper prepared by a team of economists led by Debapriya Bhattacharya during the interim government, the tenure of which ended in March.