KUALA LUMPUR – The civil service salary revision announced by Prime Minister Datuk Seri Anwar Ibrahim is reasonable, overdue, and justifiable to keep pace with inflation, an economist said.
Malaysian Economic Association deputy president Professor Yeah Kim Leng said that with improved fiscal efficiency and discipline, the government is also in a better position to afford the salary increase.
“To ensure that the salary increases are not negated by rising inflation, concurrent efforts to raise productivity in both the public and private sectors as well as to minimise unfair price increases are needed.
“This will ensure that the purchasing power of wage increases is not eroded by excessive inflation,” he said.
Earlier, the prime minister announced that civil servants will enjoy a salary hike of more than 13% starting this December, among the highest increases in the nation’s history, involving an allocation of over RM10 billion.
“The increase will be more than 13%… the best increase in history by the Madani government,” Anwar said in his speech when officiating the National Labour Day 2024 celebrations here today.
Anwar, who is also finance minister, said that under the Public Service Remuneration System, which is being revised, the government will ensure that the overall minimum pay for civil servants must reach more than RM2,000 per month.
“Currently, the overall minimum income, which includes salary and fixed allowances, is RM1,795 per month,” he said.
Meanwhile, Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid said the increment is expected to have a positive impact on sentiments and confidence among the about 1.7 million civil servants.
“Based on the prime minister’s statement, he also encouraged the private sector to take a similar step. If materialised, it would certainly impact consumer spending, which accounted for 61% of total gross domestic product in 2023,” he said.
As a measure to balance out the increased government spending on public servants’ salaries, Afzanizam said the government has been consistent in its messaging that subsidy rationalisation, especially on fuel, is expected this year.
“This will allow the government to reallocate some of the savings in subsidy reduction towards increasing the salary of government employees, which could help accelerate productivity and morale among civil servants.
“A higher services tax from 6.0% to 8.0%, except for food and beverages and communication, would also increase the government’s coffers, which could help expand the policy space for the federal government,” he said.
However, Afzanizam said there may be pressure on prices as demand from consumers would be higher.
“The introduction of Akaun Fleksibel by the Employees Provident Fund is also one of the key catalysts for private consumption, along with other measures such as cash transfer programmes such as Sumbangan Tunai Rahmah and Sumbangan Asas Rahmah.
“This has been reflected in the wide range in the projection of the inflation rate at around 2.0% to 3.5% in 2024 (2023: 2.5%). The wide range suggests the uncertainties on policy changes that might have an impact on general prices,” he said. – May 1, 2024