No new pay scale, 20% dearness allowance proposed for FY24

All government employees are likely to get a dearness allowance of up to 20% in the next fiscal year instead of a fresh pay scale anticipated by many, according to finance ministry sources.

The Ministry of Finance has made a proposal for the special allowance in the budget for the fiscal 2023-24 in consideration of the high price of essentials due to the ongoing inflation.

Officials of the Finance Division directly involved with budget preparation, said there will not be a new pay scale. This will be an election-year budget and the last in the current government's tenure.

There will be no allocation for the nationalisation of schools and colleges or the enlistment of monthly pay orders (MPO) in the new budget as well, said officials of the Finance Division.

A senior official of the Finance Division, wishing not to be named, told The Business Standard that a final meeting on the next budget will be held in May, chaired by the prime minister.

Government employees have long been expecting a new pay scale in the upcoming budget but the prime minister dismissed the idea, ministry officials said. The premier directed officials concerned to focus on macroeconomic stability in the next budget.

In the current fiscal year, the government has saved expenses in various sectors, including Tk1,093 crore from the salaries and allowances of government employees.

In the revised budget of FY23, the total allocation for salaries and allowances was Tk73,173 crore. But the Finance Division has slightly raised the estimation to Tk77,000 crore for the coming fiscal year.

Usually, the government announces a new pay scale every five years. After implementing the seventh pay scale in 2009, the government implemented a new pay scale in July 2015, raising the salary by almost 100%. Since then, the employees are getting a 5% increment in July every year.

Eight years have passed since the last scale was implemented and various organisations of government employees are demanding a fresh pay scale, citing the soaring prices of daily commodities due to the Ukraine-Russia war.

According to the latest data from the Bangladesh Bureau of Statistics (BBS), the inflation rate in March this year was 9.33% and the year-on-year average inflation rate was 8.39%.

The inflation target for FY24 has been estimated at 6%, which was 5.6% in the current fiscal year's main budget.

According to the Ministry of Public Administration data, there are about 14 lakh government employees in the country. However, this number stands at about 22 lakh if military-civilian officials and employees and MPO-listed teachers are included.

The dearness allowance is not added to the basic salary. Hence, there will be no change in their house rent and other allowances.

Current 5% increment doesn't keep up with inflation

Mahbub Ahmed, a former senior secretary to the Finance Division, told TBS that the pay commission, formed for the last pay scale implemented in 2015, recommended not to form another commission moving forward. Instead, it recommended providing a 5% yearly increment to employees.

"The pay commission at that time also recommended that if the annual average inflation rate is more than 5%, then the rate of increment should also be adjusted accordingly. But the government did not implement that recommendation and employees are getting increments at the usual rate despite the high rate of inflation," he said.

"There is no doubt that the prices of goods have increased a lot. In that regard, the government may give dearness allowance considering the financial adequacy. But, it would not be reasonable to announce a fresh pay scale at the moment," Mahbub added.

An analysis of the inflation rate since the last pay scale was implemented revealed that the amount of goods and services that could be bought with Tk100 in 2015, now cost about Tk154.

CPD proposed special increment for all employees

The Center for Policy Dialogue (CPD), while presenting its proposals for the next budget recently, said the food inflation rate is now 25% and the fixed-income government and private sector employees are suffering the most.

To address the issue, the organisation proposed a special increment for all government and private sector employees on an urgent basis.

Allocation in other sectors

Finance Division officials said the government in its last budget increased the size of the social safety net and the number of beneficiaries by about 10%. The amount of allowance has also been increased at times. This year also the ministries proposed to increase the amount of all kinds of allowances and the number of beneficiaries.

But the allocation for social security programmes such as unconditional cash transfers, which directly benefit the poor, is not increasing this year. Only the number of beneficiaries will be increased by 7.35 lakhs with an increase in allowances for the elderly, disabled and widows. This will increase the expenditure by about Tk1,500 crore.

About Tk16,500 crore was allocated to the job creation programme for the very poor under the Ministry of Disaster Management and Relief in FY22. But the allocation was slashed by Tk500 crore in the budget of the current fiscal year. The allocation will remain unchanged in the next budget.

The government provides low-cost rice under the vulnerable group development (VGD) and vulnerable group feeding (VGF) programmes for poor people. About one crore families are currently being provided food items at subsidised prices through the Trading Corporation of Bangladesh (TCB). 

In the current fiscal year, the allocation for these services was Tk5,965 crores, which was revised up to Tk6,777 crore. An additional Tk1,200 crore will be allocated in the next budget.

However, the Local Government Division and the Water Development Board have sought an allocation of about Tk6,000 crore for the repair and renovation of roads and the construction of dams at the local level. 

The Ministry of Local Government and the Ministry of Water Resources wants to spend this money on small projects across the country. These projects will not require approval from the Executive Committee of the National Economic Council (Ecnec) as the cost of each project will be less than Tk50 crore. 

The government has discouraged spending on such projects in the last financial year and the current financial year due to the economic decline induced by the pandemic and the Russia-Ukraine war.

Finance Ministry officials said, to keep the operating costs down, the government is not in favour of allocating money to these two sectors but it might have to do so due to pressure from the ministries.