Proposed hike in civil service pay structure

Sadeq Ahmed | Published: December 25, 2014 00:00:00 | Updated: November 30, 2026 06:01:00

There is no problem with the proposed pay increases per se. It is universally acknowledged that civil service pay structure in Bangladesh is low.
However, the real issues that are relevant here concern a number of areas.
The relationship between compensation and quality of civil service intake, productivity and performance is one such area.
One more is about how this structural increase in the budget is financed. Since this is a permanent rise in the cost of government service, it must be financed through a permanent means. If it is financed through borrowing from the Bangladesh Bank or printing money, there will be inflationary effect.
The quality and effectiveness of overall public spending is yet another pertinent issue.
There are substantial concerns in each areas, particularly about relationship between compensation and quality, productivity and performance of civil service and also about effectiveness (including quality) of overall public expenditure.
As an example, I would much rather give priority to adequately compensating the civil service and reforming them to provide effective and efficient services than bailing out public banks through budget transfers due to outright theft (Hallmark scandal at Sonali Bank and corruption in the Basic Bank) as well as politically-motivated lending decisions that become non-performing loans (NPLs).
Similarly we have been subsidizing inefficient state-owned enterprises (SOEs) for 40 plus years. A huge amount of assets are locked-in in these enterprises. Shouldn't these assets be productively used to earn a decent rate of return on capital instead, of earning negative return and requiring yearly subsidies from the taxpayers?
Similarly, the personal income tax collection is a mere 1.3% of the country's gross domestic product (GDP) when the Household Income & Expenditure Survey (HIES) shows that 35% of the national income accrues to the top 10% of the population.
With a 15% effective tax rate (which is reasonable), personal income tax collection should be at the level of 5.3% of GDP. This potential loss of taxes is a huge governance problem and suggests that most of the rich income group escapes the tax net.
With effective tax reform, the additional revenues could easily finance the necessary increase of compensation for an efficient and productive civil service, providing greater funding for health, education and social protection as well as financing of infrastructure.
These are the most important fiscal policy challenges than fight with the proposed increase in civil service pay scale, which is very low to start with.
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The writer is vice-chairman of Policy Research Institute (PRI), Banagladesh.
e-mail: sadiqahmed1952@gmail.com