The government has approved the National Pay Scale 2026, raising the basic salaries of government employees by between 100% and 142% and introducing higher pensions and new allowances.
The new pay structure was approved at a Cabinet meeting chaired by Prime Minister Tarique Rahman on Monday. It will be effective retrospectively from July 1, 2026, but the revised basic salaries will be implemented in phases rather than all at once.
The existing 20-grade structure will remain unchanged. Under the new scale, the minimum basic salary for Grade 20 will rise to Tk 20,000 from Tk 8,250, while the maximum basic salary for Grade 1 will increase to Tk 156,000 from Tk 78,000.
The increase amounts to 142% for the lowest grade and 100% for the highest grade. The salary ratio between the lowest and highest grades will also be narrowed from the existing 1:1.945 to 1:1.78 in an effort to make the pay structure more equitable.The government said the new structure was finalised after considering its fiscal capacity, the overall economic situation, inflation, the rising cost of living and the living standards of public employees.
Basic salaries to be implemented in three phases: Although the pay scale will take effect from July 1, 2026, the government has decided to implement basic salaries in three phases between July 2026 and July 2027.According to the Finance Division, the first phase will cover 40% of the revised basic salary from July 1, 2026, followed by another 30% from January 2027 and the remaining 30% from July 2027.Allowances will be introduced from January 1, 2028.
Recent reporting on the approved structure confirms that the phased rollout is intended to reduce the immediate fiscal and inflationary pressure of the pay increase.The Finance Division will issue the necessary gazettes, orders and instructions specifying salary fixation, allowances, pension calculations and other post-retirement benefits.A separate pay structure will be prepared for the judiciary. A committee has already been formed for the Bangladesh Judicial Service, and its recommendations will be considered separately.
Lower-paid pensioners to receive larger increases: The new pay structure provides particularly large percentage increases for pensioners receiving lower monthly pensions.The government has also committed to gradually introducing an “One Rank, One Pension” system for both civilian and military retirees by 2030. Immediate implementation has been deferred because of the significant financial burden and the lack of complete data on civilian employees who retired before 2019.
As an interim measure, pension increases will be based on different income slabs.Pensioners receiving Tk 9,000 or less per month will receive a 100% increase.Those receiving Tk 9,001 to Tk 20,000 will get a 75% increase, while those receiving Tk 20,001 to Tk 30,000 will receive a 65% increase.Pensioners receiving Tk 30,001 to Tk 40,000 will get a 60% increase, while those receiving Tk 40,001 or more will receive a 55% increase.The government says the arrangement is designed to provide greater financial protection to pensioners with relatively low incomes.
Mobile allowance expanded to all grades: The government will also expand mobile allowances to employees across all 20 grades.Previously, the facility was available only to employees in Grade 5 and above. The expansion reflects the growing importance of internet access and digital communication in government offices.For the first time, government employees with children with special needs will also receive a disability allowance.An employee will receive Tk 3,000 per month for each child with special needs.
Around 33 lakh people to benefit: The new pay scale is expected to benefit approximately 24 lakh serving civilian and military employees.More than 9 lakh retired employees and other eligible beneficiaries will also come under the new structure, bringing the total number of beneficiaries to around 33 lakh.
The government estimates that implementation will require an additional annual expenditure of approximately Tk 105,580 crore.The Finance Ministry said the necessary funds have been incorporated into the medium-term budget framework.
Once the full package, including allowances, is implemented, the government's annual salary and allowance expenditure will rise substantially. The additional fiscal burden is therefore expected to remain a major challenge for the government.
Revenue mobilisation remains a major challenge: Economists say the government will need to significantly increase revenue collection to finance the new pay structure without putting additional pressure on the fiscal deficit.The National Board of Revenue collected around Tk 4.15 lakh crore in the last fiscal year, falling about Tk 88,000 crore short of its target.
For the current fiscal year, the NBR has been given a revenue target of Tk 6.04 lakh crore, which requires roughly 45% growth over the previous year's collection.Such a sharp increase would be difficult to achieve given the current economic environment.The highest revenue growth recorded over the past five years was 12.5% in FY2021-22, highlighting the scale of the challenge facing the revenue authority.
Experts say major reforms in tax administration will be necessary to create enough fiscal space for the new pay structure.The government has discussed expanding the tax network to the upazila level, fully automating tax administration and introducing a unified VAT rate. It has also set a long-term target of raising the tax-to-GDP ratio to 15% by 2035 from slightly above 7% currently.
Economists warn against inflationary financing: Economists have also warned that the government should not finance the higher wage bill by printing money, as this could further fuel inflation. Selim Raihan, executive director of the South Asian Network on Economic Modeling (SANEM), said business activity remains sluggish and that weak economic activity could limit the government's ability to increase revenue.
He stressed that allocations for health, education and social protection should not be reduced to finance the new pay structure.The government must also avoid monetary financing of the additional expenditure, he said.
Raihan noted that the private sector is already under pressure, with investment remaining weak and business activity yet to regain momentum.According to Bangladesh Bureau of Statistics data cited in the report, private investment as a share of GDP fell below 22% in the last fiscal year, its lowest level in 14 years.
Private sector may face wage pressure: The public-sector pay increase could also create pressure on private companies to raise employee salaries.However, economists say businesses are currently facing weak investment, production disruptions and energy shortages.The ongoing gas and electricity crisis has already disrupted industrial production and raised concerns about fresh investment.
If production remains weak, government revenue could also suffer because lower business activity means lower tax and VAT collection.Raihan said private-sector entrepreneurs would be less willing to raise wages unless business activity and investment recover.
The new pay scale therefore comes at a complicated economic moment. On the one hand, the government wants to improve the purchasing power, financial security and motivation of public employees after years of high inflation.On the other hand, it must finance an additional annual expenditure of more than Tk 1 lakh crore while dealing with weak revenue collection, subdued private investment, energy shortages and inflationary pressures
Balancing employee welfare and fiscal stability: The National Pay Scale 2026 represents a major increase in government salaries and pensions and is expected to provide substantial relief to millions of employees and retirees.The challenge now is implementation.
The government will have to mobilise additional revenue, maintain essential spending on health, education and social protection and avoid excessive inflationary financing.
If revenue reforms and stronger economic growth can generate the required fiscal space, the new pay structure could strengthen public employees' financial security and improve incentives across the civil service.
But without a corresponding improvement in revenue collection and private-sector activity, the higher wage bill could put significant pressure on the government's finances.The success of the new pay scale will therefore depend not only on how quickly salaries are increased, but also on whether the government can expand its revenue base and revive investment and business activity.
