Govt forms new pay commission for public servants

The interim government has announced the formation of a new pay commission for public servants.

The commission, headed by former finance secretary and Palli Karma-Sahayak Foundation Chairman Zakir Ahmed Khan, has been tasked with submitting its report within six months, a decision made during a meeting of the Advisory Council chaired by Chief Adviser Muhammad Yunus today (24 july).

This move comes shortly after the government, which took office in August last year, granted a 5% increment along with a special incentive to public sector employees effective from 1 July this year.

However, the decision to establish a new pay commission has drawn sharp criticism from economists, who argue it is "inopportune" and will place additional pressure on the private sector amid high inflation.

Economists view the decision as another sign of bureaucratic dominance within the government, asserting that it was made without considering the country's overall economic context. 

The government has already scaled down the current fiscal year's budget, reduced allocations for the Annual Development Programme, and advocated for austerity measures, including restricting new car purchases and foreign travel. Against this backdrop, the formation of a pay commission without strong demands from civil servants has come as a surprise to many economists.

'Not very timely'

Dr Zahid Hossain, former lead economist at the World Bank's Dhaka office, told TBS that the decision to form a pay commission at this moment is "not very timely." 

He said that reviewing the pay scale should not be a priority on the current government's economic reform agenda. "It seems the government has opened an unnecessary front by forming this pay commission."

Dr Hossain emphasised that the interim government's focus should have been on economic management reforms, job creation, reviewing private sector wages, preparing for potential shocks in foreign trade, and improving the quality of public expenditure by addressing the poor implementation of the Annual Development Programme (ADP). 

He expressed bewilderment at the government's decision to form a pay commission instead of concentrating on these critical issues, calling it "another sign of bureaucratic dominance in the current government." He suggested it would have been better to leave such a decision to a long-term, elected government.

'Pay rise could fuel inflationary pressure'

Fahmida Khatun, executive director of the Centre for Policy Dialogue (CPD), echoed similar concerns. She highlighted that the budget size for the current year has been reduced compared to the previous year, and domestic revenue mobilisation is lagging. While inflation is slowly decreasing, price levels are not, and wages in the private sector have not increased, she added.

"It is clear that the macroeconomic perspective was not considered in forming the pay commission," Fahmida said. "If it had been, the government could not have prioritised only the salary increase for civil servants." 

She pointed out the contradiction in the government's approach: on one hand, it is implementing a contractionary monetary policy to control inflation, while on the other, it is considering additional expenditure on civil servants' salaries and allowances. 

The CPD executive director also noted that there was no significant demand from government employees for a pay commission. A salary increase for civil servants, she warned, would further aggravate inflationary pressure on those employed in the private sector.

No further pay commissions suggested in 2015

Currently, government officials and employees receive salaries based on the 2015 pay scale. The commission, led by Mohammed Farashuddin, which proposed that scale, had recommended that no further pay commissions would be necessary, with employees receiving a minimum 5% annual increment. It suggested that if inflation exceeded 5%, the increment rate would be adjusted accordingly.

Following the national election in 2024, amid rising inflation, then-prime minister Sheikh Hasina introduced a 5% increment along with a 10% special incentive for government employees. 

Discussions about a dearness allowance for government employees began again in November 2024 after the interim government took charge, with a committee working towards providing the allowance from January 2025. However, the government later backed down amid widespread criticism. Subsequently, Finance Adviser Salehuddin Ahmed mentioned plans for special benefits for government officials and employees in the current fiscal year's budget.

According to the budget summary, Tk84.68 crore has been allocated for the salaries and allowances of government employees in the current fiscal year (2025-26). There are approximately 15 lakh government officials and employees, a number that rises to over 22 lakh when including teachers, state-owned company and corporation personnel, and autonomous institution staff.