The day before yesterday, during budget discussion, the seven reasons I reported on why it may be time to review civil service salaries:
- Domestic revenue of the government, through tax and non-tax measures, has increased considerably since the last salary increase. In 2008-09 domestic revenues were projected to be Nu 11,932 million. In 2009-10 it was Nu 14,108 million. And in 2010-11 it is projected to be Nu 15,816 million. Domestic revenues have increased by a whopping 33% while civil service salaries have remained stagnant.
- Between 2008-09 and 2010-11 budgets, the government’s overall outlay has increased by a considerable 41%. Of that, about half goes to finance recurrent costs. Recurrent costs in 2008-09 were budgeted at Nu 11,061 million, and for 2010-11 at Nu 15,154 million. That’s a 37% jump in current expenditure in the two years. Salaries form a big part of recurrent costs, yet civil service salaries have not benefited from the 37% increase in current costs.
- Prices have increased. For the year 2009, the government has estimated a price increase of 10.74% for food items. For 2008, it estimated price increase of 11.75% for food items. That works out to a cumulative price increase of 23.75% over the last two years.
- Taxes are increasing. The government is proposing a wide range of taxes aimed at increasing revenue by Nu 450 million.
- Fuel prices have increased twice in the last six months. The last increase will drive up inflation even higher.
- Most civil servants will now receive less money. Civil servants received a uniform pay increase of 35% in January 2009. However, the basic pay was not increased. Instead the 35% increase was given as an “allowance” so that the government would not have to increase their matching contributions to the provident fund. So after the 35% allowance is incorporated in the basic pay, civil servants will henceforth receive less money in the hand every month – provident fund contributions, health contribution, TDS and more will now be deducted from the 35% increase in salary.
- The public expects a pay increase. In fact, the pay increase is a consolidation of the 35% allowance that civil servants have been receiving so far. So, in reality, they will receive less money from July onwards. But the public thinks that there is a pay increase. So prices will rise. And, in spite of the Tenancy Act, rents will, once again, increase.
I’ve suggested earlier – every year, in fact – that public service salaries should be revised every year taking into account the overall economic situation in the country. For simplicity, salary revision could be pegged to the price movements of a basket of goods and services, but one that is comprehensive and relevant.
That way, public servants wouldn’t expect a sudden hike in the salaries every now and then. And the government wouldn’t have to ponder about how best to extract political mileage when salaries are increased.