Dearness allowance for the civil servants: Will it be fair?

While taxes are increasing, OMS truck sales have stopped. Photo: Syed Zakir Hossain

Amid the recent VAT and duty hikes and the proposal to raise gas prices by Petrobangla, one particular government decision has raised eyebrows: the decision to provide all government employees and officers with a dearness allowance. This allowance will be given to everyone, from the cabinet secretary to the peons, and even to pensioners.

The exact percentage is yet to be determined, but it is speculated that a 10-15% dearness allowance may be granted to employees from the first to the tenth grade, and 20% to employees in the eleventh to twentieth grades. In this case, an additional amount of around Tk7,200 crore will be required if the rate is 10%. If a 15% allowance is provided, it will cost approximately Tk7,916 crore.

At a time when the state coffers are suffering from a fiscal deficit and citizens are struggling to cope with double-digit food inflation and rising living costs, is this really necessary? Or is it an attempt to appease the bureaucracy, which has allegedly been less cooperative with the interim government?

The question arises mainly due to the recent confrontation between bureaucrats and student leaders from the Students Against Discrimination platform. Furthermore, student advisers have expressed dissatisfaction regarding the cooperation of the bureaucrats.

On 12 September, Information and Broadcasting Adviser Md Nahid Islam stated that there is a section of the bureaucracy that has been uncooperative with the interim government. He said, "There is stagnation in the administration. We are noticing this. We are receiving non-cooperation from various quarters. We will not deny this."

Asif Mahmud Shojib Bhuiyan, the adviser for Youth and Sports, echoed a similar sentiment on 19 October: "The government may make strict decisions due to the non-cooperation of the administration. If necessary, the system will be dismantled and new people will be appointed. The government will not make any concessions on matters related to the people."

It may not be difficult to understand why the student advisers feel frustrated. The bureaucracy has been a direct beneficiary of the fallen regime. In the 15 years of Awami League rule, government employees at different levels have received ample benefits, especially in the run-up to the last three national elections.

In 2015, a new pay scale was introduced, and it has been in force since 2016. It was also decided that new pay scales would be introduced every five years, with annual increments. However, no new pay scale was introduced in 2021. Nonetheless, bonuses continued.

Moreover, home loans at 5% interest have been provided to officers and employees at all levels. Officers and employees above the deputy secretary level and those from the joint secretary level of the legislative and parliamentary affairs department and above are receiving Tk30 lakh interest-free loans for car purchases, and Tk50,000 per month for maintenance.

In addition, even amid the ongoing economic recession, a special incentive of 5% to government employees was granted in both 2023 and 2024. The National Board of Revenue also exempts the salaries, bonuses, and festival allowances of government officials and employees from tax.

Government officials and employees are eligible for a maximum home loan of Tk75 lakh at 5% interest, starting in 2018. The total interest rate for this loan will be 10%. However, the government will subsidise 5% of the interest, with the remaining 5% to be paid by the borrower.

The government also made another round of promotions in the administration before the 12th National Parliament election in 2024. Moreover, when the country was implementing austerity measures and taking strict steps to reduce expenditure, it sought to purchase 261 sports utility vehicles (SUVs) for District Commissioners (DCs) and Upazila Nirbahi Officers (UNOs). Each Mitsubishi Pajero Sport QX model vehicle would have cost Tk1,45,84,500. However, due to massive backlash, this plan was scrapped.

This shows that the bureaucracy has been generously rewarded during the past regime. Following the July Uprising, a reform commission was formed to make decisions on promotions through examinations for the posts of Deputy Secretary and Joint Secretary and to maintain a 50% quota for cadres other than the administrative cadres.

Inevitably, the backlash was immediate. Administrative cadre officials began protesting, and district commissioners from all 64 districts urged the commission to scrap the decision. Reports suggest that the some of the initially proposed changes will not be recommended by the commission.

At a time like this, providing the bureaucrats with a dearness allowance may be the government's way of appeasing them. But is it fair to grant such an allowance when the fiscal deficit is straining the economy?

Professor Mustafizur Rahman, a distinguished fellow at the Centre for Policy Dialogue (CPD), believes it is understandable to provide a dearness allowance to civil servants. However, he stresses that the government must ensure that others receive support in some form as well, as they too are suffering under high inflation.

"We need to enhance our social security services, increase open market sales, protect marginalised groups, and keep the informal economy afloat. Government officials certainly need the dearness allowance. But the question of distributive justice and equity arises here."

He emphasised the need to provide benefits to the marginalised, as they are the most vulnerable to rising prices.

Dr Zahid Hussain, former lead economist at the World Bank's Dhaka office, shares a similar view.

"It has not been finalised, but we hear it is going to cost the exchequer Tk7,000 crore. If we consider our affordability, this is a significant amount. The government has increased VAT and duties to raise Tk12,000 crore; more than half of the increased revenue will go towards the allowance."

"The products affected by the recent price hikes are not daily essentials, but they are commonly used. Under the current circumstances, this is not ideal," he added. 

He believes that limiting the allowance to lower-grade government employees would have been a better approach.

"Right now, it seems like carrying coal to Newcastle. On one hand, taxes are increasing, and OMS truck sales have stopped. This will only add to the inequality. Yes, we can argue that in a large economy like ours, Tk7,000 crore is not much from an economic perspective. But, in light of the other fiscal measures, the direction of this decision looks poor, and it tarnishes the government's image."

In a 'discrimination-free' Bangladesh, it does not seem equitable or fair. So, could this be an attempt to appease government officials?

"It may be an attempt to offer incentives to government officials to gain more cooperation from them," Dr Zahid Hussain said. "Apart from serving a motivational purpose, there is no other plausible rationale."

Dr Sadik Hasan, professor of Public Administration at the University of Dhaka, offers a different explanation for the dearness allowance.

"Since 2015, no new pay scale has been introduced. It was also stated that the pay scale would be regularly updated according to the inflation rate, but this has not occurred consistently. In 2023, the previous government gave incentives to government officials, around 4-5%. Now, we are seeing a similar incentive, but on a larger scale—10-20%."

He, too, believes this might be an incentive to motivate government officials.

The total government workforce is approximately 14.5 lakh. While this number is not large compared to the overall economy, the problem arises when news of the dearness allowance reaches the market. Prices of commodities will likely rise dramatically, as is the norm here.

"On one hand, officials need the allowance for some relief, but on the other hand, it will cause more discomfort for the rest of society," he added.

Dr Syeda Lasna Kabir, professor of Public Administration at Dhaka University, also highlighted the potential impact of the dearness allowance on the market.

"If inflation does not decrease and the cost of living continues to rise, what's the point of the allowance? When the news reaches traders, they will simply increase the prices of products. It's a pattern—any increase leads to higher prices."

However, she does not believe this is an attempt to incentivise the bureaucracy.

"I don't think this is the case. There have been some grievances due to rising inflation, so the decision might have been made to provide some relief."