The government's recent decision to adjourn the proposed Dearness Allowance (DA) for its employees has provoked outrage in Bangladesh's public sector, generating severe worries among government employees. While fiscal limitations and economic considerations may have influenced the government's decision, it is crucial to consider the broader impacts of this action on the welfare of government employees and the larger socioeconomic landscape.
The special allowance given to cope with the rising prices of essential commodities is known as the Dearness Allowance. It is provided as an additional percentage of the basic salary which increases the salaries of officers and employees.Many countries have continued to provide DA as a mechanism to offset the rising cost of essential goods and services. In Bangladesh, DA has been a crucial component of government employees' salaries as employees were granted an additional 5% incentive on their basic salary alongside the existing annual increment since July 2023. This financial benefit is intended to shield workers from the adverse effects of inflation, allowing them to maintain their living standards as the cost of living is increasing. It serves as a direct response to inflationary pressures, and for many public servants, it represents a much-needed buffer against increasing costs of living. In a country like Bangladesh, where the cost of living continues to climb due to rising inflation in food and essential goods, DA has become a financial patron for thousands of government workers. It has been learned that the Finance Division recently prepared a draft to provide a DA ranging from a minimum of 10% to a maximum of 20% of the basic salary for approximately 1.45 million government employees which is expected to be effective from 01 January 2025. However, a recommendation was also made to exclude the 5% annual increment that government employees receive. Additionally, this benefit was proposed for all government employees including retired officials and employees who receive pensions. It has been stated that everyone, from peons to the Cabinet Secretary, will receive the dearness allowance which may be implemented in two phases-employees may receive a slightly higher amount, while officers may receive a bit less.
On 28 January 2025, Finance Adviser Dr Salehuddin Ahmed declared that the government has not yet made any decision regarding the allocation of dearness allowance (DA) for its officials and employees.The government's decision to postpone DA sends a troubling message to the very workers who have been serving the nation diligently. Public servants in Bangladesh are grappling with low salaries of the last pay scale 2015. Since the implementation of the national pay scale in 2015, inflation has risen by approximately 40%. However, government employees have received an annual increment of only 500 to 1,000 BDT, while the cost of living has increased by around 5,000 BDT or more. Although several initiatives have been taken since 2018 to determine the future salaries and allowances of government officials and employees in line with inflation, nearly five years have passed, and the recommendations have yet to be implemented. Along with high inflation, the recent decision to increase taxation has already adversely affected the pricing of public goods. Now, many government employees are struggling to make ends meet with inflation pushing up prices on everything from food to transport. DA could slightly mitigate this issue by soothing financial insecurity for those who can least afford it. Where the purchasing power of government employees is drastically reduced, this decision potentially leads to increased dissatisfaction and decreased morale.
However, the government's decision to defer the dearness allowance (DA) for public servants stems from several economic considerations. Firstly, the government is facing financial challenges, including a decline in net borrowing from foreign sources and increased domestic borrowing. For instance, during July-October of FY25, the government's net borrowing from the banking system stood at Tk 172.80 billion, representing 12.6% of the annual target. In contrast, during the same period in FY24, there was a net repayment of Tk 37.04 billion to the banking system. This surge in borrowing may limit the availability of funds for other expenditures, such as DA. Secondly, the plan to provide a dearness allowance will increase government expenditure by at least 7,000 crore BDT in one year. As in the revised budget, there is no fund for DA, this additional expenditure is not justifiable from an economic viewpoint. Finally, initiating the DA could potentially fuel inflation. An increase in disposable income for a segment of the population might lead to higher demand, prompting traders to raise the prices of essentials, thereby nullifying the benefits of the allowance and worsening the economic disparity between public sector employees and those in the private sector or informal economy. In summary, the government's decision to postpone the DA rise is a strategic measure aimed at managing fiscal deficits, controlling inflation, and ensuring the availability of funds for critical economic operations.
While the government's decision to cancel DA may have been made with some economic standpoints, it is essential to remember that the well-being of public employees should be a priority. DA isn't just a financial lifeline; it is a symbol of fairness and equity. The purchasing power of government employees has been eroded due to the rising inflation and increasing cost of living. Although salaries have seen incremental increases, they have not kept pace with the high inflation rates. Here, DA could be the primary safeguard against financial hardship. Moreover, the DA is important for pensioners, who are equally impacted by inflation. It is time for policymakers in Bangladesh to prioritize this issue, adjusting DA in line with the economic realities faced by the citizens. Introducing targeted financial support programs or implementing DA could be a solution. Doing so will not only improve the well-being of public employees but will also contribute to a more stable and productive workforce, ultimately benefiting the country as a whole.
Ultimately, the decision to postpone the Dearness Allowance is a regressive step that threatens the financial security of public sector workers in Bangladesh. As the government must balance its fiscal responsibilities, the government needs to reconsider this decision and find more sustainable and equitable solutions to address inflation and the cost of living. Thepublic servants play a crucial role in governance, and their job satisfaction and financial security directly impact their efficiency and productivity, thus initiating a fair and strategic approach like DA could help maintainfinancial well-being of public servantsand economic stability.
Bithe Rani Aich, Research Associate, Bangladesh Institute of Governance and Management (BIGM) and Tasneem Islam Dyuti, Assistant Director (Admin), Bangladesh Institute of Governance and Management(BIGM)
