The Govt Pay Hike Should Not Raise the Cost of Living, Inflation

A salary increase should bring relief, not make everyday life more expensive. Yet that is the concern surrounding the government’s approval of the National Pay Scale 2026. The new structure will raise salaries across the government workforce, with the minimum basic salary jumping 142 per cent to Tk 20,000. According to the government, the move will help employees cope with rising living costs. We understand that objective.

However, when inflation already squeezes household budgets, such a substantial boost in public-sector incomes could fuel demand, put pressure on prices and strain public finances. A measure meant to ease financial hardship should not create fresh pressure on the wider population. The ratio of public sector officials and employees is insignificant compared to the employment in the private sector. Besides salary the government officials and employees enjoy other state facilities which in private sector are absent.

The scale of the financial commitment makes this concern more pressing. The new structure covers the entire government workforce, along with pensioners and other beneficiaries. It will add around Tk 1,05,580 crore to annual government expenditure. This is a major recurring obligation. More borrowing could increase debt-servicing costs, while higher taxes could squeeze households and businesses. Meanwhile, greater spending on salaries and pensions could leave less room for development and social programmes.

The inflationary risk deserves particular attention. A substantial rise in public-sector incomes will increase spending capacity. If the supply of goods and services fails to keep pace, stronger demand could push prices higher. Families already struggling with the prices of rice, vegetables, fish, meat and other essentials would feel the impact first. Thus, part of the benefit of the pay hike could disappear as everyday necessities become more expensive. Moreover, the adjustment could widen the gap between government and private-sector employees. Public servants will receive a structured improvement in income, while many private-sector workers face the same price pressures without a comparable adjustment. Their living standards could consequently come under greater strain. The salary hike in public sector will have a consequential affect on the private sector which will be a big burden on the private sector.

The authorities should address these risks through a balanced fiscal and anti-inflation strategy. They need to strengthen revenue collection, control non-essential spending and limit excessive borrowing. At the same time, they should closely monitor essential commodity markets and act against hoarding, artificial shortages and manipulation. Phased implementation could help officials assess the impact on prices and public finances. More importantly, higher remuneration should come with higher productivity through stronger performance evaluation, digital services and accountability. The common people will have to bear the brunt of the state spending hike by paying more taxes. So they have a right to see reduction in corruption in administration and more transparency and accountability in bureaucracy.

We expect the government to balance the interests of public employees with those of the wider population. Fair remuneration is, of course, important, especially when living costs remain high. Nevertheless, the reform should not deepen the cost-of-living crisis or widen the divide between public- and private-sector employees. We also expect stronger consumer protection as the new pay scale takes effect. Above all, the government should keep the cost of the reform within its fiscal capacity and make adjustments when necessary to protect economic stability.