This article first appeared in The Edge Malaysia Weekly on May 6, 2024 - May 12, 2024

Prime Minister Datuk Seri Anwar Ibrahim on Labour Day announced a pay rise for civil servants, ensuring the public staff’s monthly salary will not be less than RM2,000 starting this December.

According to Anwar, who is also the finance minister, the overall minimum pay of civil servants, which includes salary and fixed allowance, is RM1,795 a month now.

The civil service pay hike is laudable, given the mounting inflationary pressure and subsidy rationalisation expected this year, should the government walk the talk.

Anwar said the pay rise will cost an additional RM10 billion.

How will the higher emolument bill be funded?

The emoluments, prior to the pay hike, are estimated to be RM95.64 billion this year, which is equivalent to 31.5% of the government’s total operating expenditure (opex) and 24.3% of the total public expenditure of RM393.8 billion allocated for the National Budget 2024.

Notably, emoluments have been on an upward trend over the years. Emoluments amounted to RM91.27 billion in 2023, RM87.78 billion in 2022 and RM84.5 billion in 2021.

In the longer run, civil servants’ pay hikes will mean a heavier pension burden on the government. The higher emolument bill will mean that it is even more crucial that new intakes go on the provident scheme, like the Employees Provident Fund in the private sector, to avoid a pension crisis in the future.

As it is, emoluments coupled with retirement charges already take up more than 40% of the opex, not to mention the climb in debt service charges. The three items combined account for more than half of the opex — an alarming trend. As more needs to be spent on emoluments, pensions and debt service charges, it is challenging for the government to have bigger allocation for development expenditure to build public infrastructure and improve public welfare.

Emoluments are sticky downward. The government has no choice but to deal with the thorny tight fiscal position.

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