If the proposed salary structure recommended by the National Pay Commission for government employees is implemented, income inequality in Bangladesh is likely to widen further, economists and business leaders have warned, citing severe fiscal pressure and potential spillover effects on prices and the private sector.
Experts fear that a sharp rise in public sector salaries would push up market prices, intensifying inflationary pressure across the economy. This, they say, would not only affect consumers at large but also disproportionately burden private sector employees, who account for nearly the entire workforce.
Economists caution that such a move could disrupt overall economic balance, making it increasingly difficult for lower-income groups to manage daily expenses. At a time when the private sector is already grappling with gas and electricity shortages, rising production costs and stagnant investment, additional pressure from wage adjustments could further weaken its capacity to operate sustainably.
According to the Pay Commission proposal, the additional annual expenditure on salaries, allowances and pensions would amount to Tk 106,000 crore - Tk 80,000 crore for salaries and allowances and Tk 26,000 crore for pensions. Analysts have raised serious concerns about whether the country's current fiscal capacity can absorb such a massive increase.
At present, a significant portion of government revenue is already being spent on operational expenses, while much of development spending relies on borrowing. Economists question whether the government would be forced to take on new debt to finance regular expenditures such as salaries and pensions - a practice widely viewed as fiscally unsound.
Business leaders argue that borrowing to meet recurrent expenses would exacerbate debt pressure and undermine financial discipline, potentially destabilising the broader economy.
The responsibility of implementing the proposed pay scale will fall on the next elected government, as the issue is unlikely to be resolved just weeks before the national elections. While the interim government may form a review committee, final approval of the pay scale is expected to come during the tenure of the next administration.
Economist Prof Abu Ahmed described the proposed salary increase - reportedly as high as 147 per cent in some cases - as "unreasonable and unprecedented," warning that no previous Pay Commission had recommended hikes of this magnitude. He cautioned that such a move could severely damage fiscal discipline and place immense pressure on both the government and the private sector.
Former World Bank lead economist Dr Zahid Hossain echoed similar concerns, noting that the current revenue situation does not support the implementation of the proposal. He questioned the absence of a clear explanation on how the additional Tk 106,000 crore would be financed.
Dr Hossain warned that raising indirect taxes such as VAT to generate revenue would directly hurt ordinary citizens, particularly amid already high inflation. He also noted that higher government salaries would inevitably trigger demands for wage increases in the private sector, which is currently ill-equipped to bear such pressure.
Bangladesh Employers Federation (BEF) President Fazlee Shamim Ehsan pointed out that past salary hikes were often justified as tools to reduce corruption and improve efficiency, yet delivered limited results. He warned that irrational increases in customs duties and taxes to finance the new pay scale would further complicate business operations and trade.
Ehsan also cautioned that interim or unelected governments often leave major fiscal burdens for incoming administrations, adding to governance challenges. He said an increase in government salaries would influence market wages, potentially fuelling inequality and economic instability.
Private sector stakeholders highlighted that industrial production is already being disrupted by acute energy shortages, forcing many factories to scale back or temporarily halt operations.
Combined with high interest rates, policy uncertainty and rising import costs, these factors have dampened investor confidence and stalled industrial expansion, limiting job creation.
Dr Mustafizur Rahman, Distinguished Fellow of the Centre for Policy Dialogue (CPD), said salary increases are justified to protect employees' living standards and purchasing power. However, he stressed that such increases must be implemented gradually, alongside measures to improve service quality, accountability and revenue collection, while curbing tax evasion.
Without a clear roadmap and fiscal safeguards, experts warn that the proposed pay hike could deepen economic stress rather than deliver the intended relief.
