Pay Commission report sparks inflation fear

Mohammad Mufazzal | Published: December 23, 2014 00:00:00 | Updated: November 30, 2024 06:01:00

The proposed pay hike for government servants has triggered widespread fear of increase in overall inflation.
Economists, experts and businesses consulted by the FE aired their worries, particularly in consideration of the possible plight of low-income group of people, especially least-paid private employees.
The Pay and Services Commission headed by Mohammad Farashuddin, an ex-governor of Bangladesh Bank (BB), submitted Sunday its report to Finance Minister AMA Muhith with recommendation for nearly 100 per cent pay hike.
On Sunday Finance Minister Mr. Muhith however said the pay hike would not push inflation up.
M. A. Taslim, a professor at the department of Economics of the University of Dhaka, said usually the price situation comes under pressure following the announcements of salary hike for public servants and the government does not have any control over the groups responsible for hike in the prices of commodities.
"Prices of essential commodities will start increasing from now on. When the proposed salary hike will be made effective from July 1 next, it will be found that government employees will accrue some benefit. But the private sector employees and other workforces will be hit hard unless their income level is raised accordingly," Prof Taslim said.
He said it is obvious that the house rent will increase following the latest Pay Commission report.
"Fixed-income groups who specially live in the capital, Dhaka, and Chittagong will be the worst sufferers," Prof Taslim noted.
He predicts inflation will increase a little bit initially, but it may come under intense pressure if the central bank does not adopt contractionary monetary policy.
After showing a significant rise, the rate of inflation has been on a downturn over last few months.
According to data of Bangladesh Bureau of Statistics (BBS), the inflation on point-to-point basis for the food items in November this year was lower at 6.44 per cent. In the previous month, October, it was recorded at 7.16 per cent.
The non-food inflation, however, went up slightly to 5.84 per cent in November. In October, it was recorded 5.74 per cent in the BBS data.
Dr. Mustafa K. Mujeri, Director-General of Bangladesh Institute of Development Studies (BIDS), said there is no valid reason behind price hike of commodities following the latest announcement on government employees' salary hike as their proportion is very small compared to the country's overall workforce.
"But some effects are observed following such announcement. As a result, other income-oriented workforces get affected as some vested quarters try to avail the advantage of salary hike due to poor market management," Mr. Mujeri said.
The development-policy expert stressed competitive market management along with a permanent pay commission to avoid illogical effects of salary hike on overall workforce.
President of country's apex trade body -- the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) -- Kazi Akram Uddin Ahmed Monday raised the issue of illogical rise in the prices of commodities at their annual general meeting (AGM).
"Public servants are only 2.5 per cent of the overall workforce. So, at the AGM I have told the businessmen that there is no valid reason for hike in commodity prices affecting the employees of other sectors based on the recommendation of salary hike for public servants only," Mr. Akram told the FE.
He said house rents should also be in conformity with the income of the tenants.
"We will also discuss such issues at the FBCCI's next board meeting," Mr. Akram added.
Mohammed Farashuddin, the chief of the latest pay and services commission, could not be reached in spite of repeated attempt.
REHAB President Alamgir Shamsul Alamins Monday said the country's real-estate sector, including 200 backward- linkage industries, would be benefited if the proposals from the eighth pay commission were implemented.
"This proposal will be helpful for the government officials and employees as well as for the real-estate sector," he told the FE.
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