Wage hike comes with economic cost

The newly approved National Pay Scale 2026 will have a significant impact on Bangladesh’s economy, particularly at a time when inflation remains high, said Dr M Masrur Reaz, Chairman and CEO of Policy Exchange Bangladesh and former Chairman of the Bangladesh Securities and Exchange Commission (BSEC).

Speaking to The New Nation after the Cabinet approved the new pay scale, Dr Reaz said a revised pay structure was necessary to motivate talented government
officials and employees, including those in the civil administration, while helping them maintain a reasonable standard of living amid rising commodity prices.

However, he questioned whether the current economic conditions were the right time to introduce the new pay scale.

“It is necessary to consider whether this is the right time to announce a pay scale, given the current high inflation in the economy,” he said.

Dr Reaz noted that the additional expenditure associated with the new pay structure was nearly equivalent to the size of the annual national budget, making its financing a major consideration for the government.

He said introducing the pay scale would have been more logical if inflation were hovering around 7%, as the economy would then have had greater scope to absorb the additional expenditure without creating further pressure.

The key issue now, he said, was how the government would finance the additional spending.

“The government needs to consider where the revenue will come from and what strategy will be adopted to secure the necessary funds,” Dr Reaz said.

He stressed that while better remuneration was important for retaining capable public servants and aligning their incomes with the rising cost of essential commodities, the government would need to ensure that the additional spending did not aggravate existing inflationary pressures.

The comments came after the Cabinet approved the National Pay Scale 2026, under which basic salaries will be implemented in three phases between 1 July 2026 and 1 July 2027.

The government has estimated that implementation will require an additional annual expenditure of around Tk1,05,580 crore.

The new pay structure retains 20 grades, with the minimum basic salary for Grade 20 set at Tk20,000 and the maximum prescribed salary for Grade 1 at Tk1,56,000.

The government has said the phased implementation was chosen partly because of its financial implications and potential impact on inflation.

Dr Reaz’s assessment highlights the central challenge facing the government: balancing the need to improve public servants’ purchasing power and morale with the fiscal and inflationary pressures associated with a major increase in public expenditure.