New Pay Scale to Raise Salaries by Up to 142%, Putting Fresh Strain on Economy

The government has approved the ninth national pay scale for government employees at a time when the economy is already grappling with an energy crisis, sluggish revenue collection and persistently high inflation.Under the new pay structure, salaries of government employees will rise by up to 142 percent. Economists, however, fear that financing the massive additional expenditure could put considerable pressure on the overall economy.Managing the additional spending, containing inflationary risks and maintaining a balance with the private sector will be among the government's biggest challenges in implementing the new pay scale.According to Finance Ministry sources, the government will need an additional Tk 105,580 crore to implement the new salary structure. If all allowances are introduced simultaneously in January 2028, annual government expenditure on salaries and allowances will rise to nearly Tk 2 lakh crore.That amount is equivalent to almost half of the revenue collected by the government in the last fiscal year. The government will also require around Tk 40,000 crore in additional funds during the current fiscal year to begin implementing the new pay structure.Higher purchasing power may fuel inflationThe new pay scale will increase the income and purchasing power of government employees, potentially creating additional demand in the domestic market.Economists fear that such increased demand could put further pressure on inflation, which has already remained elevated for a prolonged period.Experts say the issue is not simply about allocating additional funds in the budget. Once salaries and allowances are increased, the higher expenditure will continue in subsequent years, creating a long-term impact on the government's revenue and expenditure structure.The increased recurring expenditure could also put pressure on revenue mobilisation, debt management, inflation control and the government's ability to support private investment.Implementation may take another monthOfficials at the Finance Division said government employees may have to wait another month before receiving salaries under the new structure.An additional secretary of the Finance Division told Amar Desh that it could take another one to two weeks for the gazette notification on the new pay structure to be issued.Once the notification is issued, salaries will have to be recalculated according to the new structure. The revised system will then be incorporated into iBAS, the government's integrated budget and accounting system.The entire process could take around a month, according to officials.Pay hike comes amid energy crisisThe new pay structure has been approved at a time when the global energy market is facing a major crisis. The country's energy shortage has already forced many factories to suspend operations, while others have reduced production.The government itself does not expect the crisis to ease quickly.Finance and Planning Minister Amir Khosru Mahmud Chowdhury, Commerce and Industries Minister Khandaker Abdul Muktadir and the Prime Minister's Adviser on Information and Broadcasting, Dr Zahed Ur Rahman, have repeatedly said that it could take more than two years to overcome the energy crisis.The resulting slowdown in business and industrial activity has also affected revenue collection. Economists therefore believe that implementing the new pay scale will inevitably create additional financial pressure on the government.Revenue shortfall adds to the challengeThe size of the budget for the current fiscal year, 2026-27, is Tk 9.38 lakh crore, while the revenue collection target has been set at Tk 6.95 lakh crore.This means the government will not be able to finance the entire budget expenditure through revenue, leaving a deficit of Tk 2.43 lakh crore.In the 2025-26 fiscal year, the National Board of Revenue (NBR) had a target of Tk 5.03 lakh crore. It ultimately collected Tk 4.15 lakh crore, leaving a shortfall of nearly Tk 1 lakh crore.For the current fiscal year, the NBR has been set a revenue collection target of Tk 6.04 lakh crore.Experts expect a substantial revenue shortfall to remain at the end of the fiscal year. In such circumstances, they say the government will have to focus on expenditure rationalisation as well as strengthening revenue mobilisation to meet the additional cost of the new pay structure. The challenge for the government, therefore, will not end with approving the new pay scale. Ensuring its long-term financing without aggravating inflation or putting further pressure on the broader economy could prove to be the bigger test.