IMF urges delay in ninth pay scale

The International Monetary Fund (IMF) has advised Bangladesh to postpone the implementation of the proposed ninth national pay scale for government employees by at least two years, citing concerns over its potential impact on public finances and the broader economy.

Despite the recommendation, the government is not inclined to shelve the plan. Prime Minister Tarique Rahman has instead directed officials to conduct further analysis and develop an implementation strategy, according to finance ministry sources.

The IMF raised the issue during recent discussions with finance officials in Dhaka, warning that introducing the new pay structure now could significantly increase annual government expenditure, widen the budget deficit, fuel inflation and put additional pressure on macroeconomic stability.

The matter is expected to be discussed again during the World Bank-IMF Annual Meetings in Thailand in October. An IMF mission is also expected to visit Bangladesh in November to review the proposed pay scale alongside negotiations for a new loan programme.

Government officials, however, are aiming to complete the gazette notification for the pay scale before those discussions.

A five-hour meeting at the Prime Minister’s Office on Sunday reviewed the proposed salary structure, recommendations from the secretaries’ committee and its possible fiscal impact. Finance Minister Amir Khasru Mahmud Chowdhury, Finance Secretary Dr Khairuzzaman Majumder and other senior officials attended the meeting.

The Finance Division has nearly finalised its proposal for cabinet approval, which could be placed before the cabinet later this week or at its next meeting.

A finance ministry official said the government remains committed to introducing the new pay scale but is considering implementing it in phases to ease the financial burden.

The current eighth pay scale has been in effect since 2015. Government employees have long demanded a revised salary structure, citing rising living costs, including housing, healthcare and education.

The proposed pay scale would cover around 1.5 million government employees and several hundred thousand pensioners. In addition to higher basic salaries, it includes increases in housing, medical and other allowances.

Bangladesh is currently under a $5.5 billion IMF loan programme and is negotiating a new package worth about $6.5 billion. The IMF has urged the government to carefully assess its revenue capacity, budget deficit and macroeconomic risks before committing to higher recurring expenditures.