In the current volatile economic climate, government officials and employees are temporarily not receiving the dearness allownace (DA). The dearness allowance, also known as Cost of Living Allowance (COLA), is an extra sum of money that is provided to offset the impact of inflation on the cost of living.
According to the Ministry of Finance, on Thursday, documents related to the proposed allowance were submitted to the Chief Advisor’s Office.
However, the office returned the documents without approval, stating that, given the prevailing economic conditions, implementing the COLA at this time would not be appropriate.
The office indicated that the issue might be reconsidered when the economic situation stabilizes.
Ministry sources disclosed that the finance division had drafted a proposal to provide COLA to 1.45 million government employees, with rates ranging from a minimum of 10% to a maximum of 20% of their basic salary.
However, the draft also suggested discontinuing the 5% annual increment currently received by these employees. Based on the finance division's calculations, implementing the proposed COLA would result in an additional expenditure of at least BDT 5,000 crore in a single fiscal year.
The Ministry of Finance further noted that the additional cost of the COLA was calculated based on the existing budget allocation. Typically, the allocation for salaries and allowances increases by 6% to 8% annually.
If this trend continues, the allocation for salaries and allowances could reach approximately BDT 89,500 crore in the 2025-26 fiscal year. Including the proposed COLA would require an additional BDT 7,500 crore, raising the total expenditure for salaries and allowances to about BDT 96,500 crore for that fiscal year.
Experts argue that current efforts to control inflation through contractionary monetary policies and reduce government spending make the introduction of COLA at this time unreasonable.
Dr. Zahid Hossain, former Chief Economist of the World Bank’s Bangladesh office, explained, “There is no economic justification for introducing the COLA. Government employees are not underpaid, and since 2015, their salaries have surpassed those in the private sector.
For instance, Deputy Secretaries can access interest-free car loans and receive an additional BDT 50,000 per month for vehicle management. Given these benefits and the current economic situation, withholding the COLA is a logical decision.”
It is important to note that a new pay scale is typically introduced every five years. The most recent, the eighth pay scale, was implemented in July 2015. While that pay commission did not propose a new structure, it did recommend annual increments to address inflation.
Until July 2023, government employees received a 5% annual increment. However, citing rising inflation, employees began demanding a new pay structure and additional benefits. In response, the Ministry of Finance initially planned to implement a 20% COLA in the 2023-24 budget.
Although this plan was ultimately shelved, employees were instead granted an additional 5% incentive on their basic salary alongside the existing annual increment. As a result, since July 2023, government employees have been receiving a total increment of 10% on their basic salary.
In an attempt to ease the burden of inflation, the interim government initiated discussions about reintroducing the COLA. To this end, a committee was formed on December 11 to evaluate the feasibility of providing the COLA to officials and employees under the 2015 national pay scale.
