Highlights:
- Government to introduce new dearness allowance from 1 July
- Grades 1–9 get 15%, grades 10–20 get 20%
- Dearness allowance replaces 5% special incentive from FY2023-24
- Change will increase government spending by nearly Tk7,000 crore
- Economists warn of strain due to inflation and fiscal limits
- Budget for salaries could reach Tk96,000 crore in FY26
The upcoming national budget is expected to announce a 15% dearness allowance for government officials in grades 1 to 9, and 20% for those in grades 10 to 20. This benefit will be effective from 1 July, allowing government employees to receive the new allowance from that date.
A senior official at the finance ministry confirmed to TBS that the proposed allowance rates were finalised during a meeting held at the ministry on Tuesday.
Finance Adviser Dr Salehuddin Ahmed also confirmed that dearness allowance for government employees is being actively considered in the upcoming budget, with a dedicated committee currently working on the matter.
Since 2015, government employees have been receiving an annual 5% increment in salary. Ahead of the last national election, from July 2023, the Awami League government introduced an additional 5% special incentive, alongside the annual increment.
This special incentive remains in effect. However, once the dearness allowance is implemented, the 5% special incentive introduced in FY2023-24 will be discontinued.
This means that from July onward, government employees will receive the standard 5% annual increment plus the new dearness allowance. According to a finance ministry official, this will increase government expenditure by nearly Tk7,000 crore.
Following the fall of the Hasina government, a committee was formed in December to explore the introduction of a dearness allowance to ease the burden on civil servants amid persistently high inflation. The initial proposals recommended a 20% allowance for employees in grades 10 to 20, and 10%-15% for those in grades 1 to 9.
The committee held several meetings, during which the secretary of Public Administration suggested the allowance be implemented from January.
However, economists close to government advisers voiced concerns about the initiative, given the financial constraints faced by the government during a period of high inflation affecting the general public. At the time, the finance adviser said no decision had been made regarding the matter.
The current fiscal year’s budget allocated Tk82,990 crore for the salaries and allowances of government employees, representing 10.41% of the total budget. Various levels of the administration, which allegedly faced discrimination under the Awami League government, have seen multiple rounds of promotions. Additionally, Tk75 crore has been provided as compensation to 764 officials who retired during the previous administration and were reportedly deprived of promotions.
Ministry officials said the budget allocation for salaries and allowances typically increases by 6%-8% annually. Based on this, the allocation for FY26 could reach approximately Tk89,500 crore. If the dearness allowance is added, the total expenditure could potentially rise to a maximum of Tk96,000 crore.