The government has approved the National Pay Scale 2026 that has recommended the minimum basic salary increasing from Tk 8,250 to Tk 20,000 and the maximum from Tk 78,000 to Tk 156,000 after over 10 years of delay. An estimated extra Tk 105,580 crore will be needed per annum once the measure is fully put in place for an estimated 2.4 million civilians and military employees and more than 900,000 pensioners and other beneficiaries. Gradually implementing the measure will allow for a more even mix between purchasing power of employees and fiscal and inflationary considerations. More important, increased wages will lead to an increase in consumption, and if this additional consumption is matched by an increase in output, then it will induce additional investments, employment and income, thereby providing extra economic momentum from the pay increase.

Beyond Government: The Wider Workforce

The government employs only a small number of people (5.80 crore or 84 percent) with the majority of the workforce employed informally. The vast majority of the workforce will thus not automatically benefit from a pay rise, while their cost of living goes up. Replacing the government's pay scale throughout the economy is impractical and unaffordable; sustainable is better to stimulate the income of the private sector and informal sector with increased investment, production and productivity.

Turning Surplus Liquidity into Investment

The banking system is probably the best opportunity. Banks' surplus liquidity stood at Tk 4.08 lakh crore at end-June 2026, accompanied by an increase in deposits of 10.74 per cent, but the credit growth slowed down to merely 4.47 per cent, which is the lowest in more than 3 decades. This issue is not about scarcity of money, but about the scarcity of flows of money in productive investments. Expansionary components of the new pay scale can help, but there is also an element of energy and energy predictability, finance and energy policy predictability needed. The priority should be to turn bank liquidity into investment, production, employment, income and consumption.

Energy: The Missing Link to Higher Production

Perhaps the most obvious constraint is that of energy. Bangladesh is in need of 3800-4000 mmcfd of gas while the normal supply is around 2600 mmcfd, which is around one-third of the desired supply. Supply dropped again, to approximately 2,235 mmcfd, in August. The unit costs are raised because factories which run below capacity continue to pay employee wages, interest and fixed costs. In other words, if the machines are not running, there's no way a business can sustainably pay more. The security of energy is therefore, as much as Infrastructure, about the wages, jobs, and competitiveness.

Channel Finance into Productive Growth

The Tk 60,000 crore stimulus package from Bangladesh Bank, which has allocated Tk 41,000 crore from the surplus bank liquidity, is a good move. The focus now is to redirect the finances to viable businesses to finance working capital, expansion, technology, energy efficiency and export with special emphasis on SMEs. Credit discipline needs to be maintained: finance enterprises capable of producing, employing, exporting and repaying. Business costs can also be cut further by enabling faster VAT refunds, customs clearance, utility connections and approvals, which can boost investments as well.

Protect Lower-Income Workers

The new pay scale will almost certainly affect the expectations of pay in the private sector, especially among those at the lower end of the pay scale who will also have to deal with escalating living costs. However, companies must boost their revenues and productivity to gain sustainable wage gains. Thus, sectoral minimum wages should be adjusted for the price rise, sector productivity and capacity, and measures taken to support the targeted food, transport and healthcare sectors. The aim should not be to raise nominal wages, but to increase real income.

Six Priorities to Turn Higher Pay into Growth

There are also six complementary measures that could go hand-in-hand with the new pay.

First, regain the availability of industrial energy, particularly that for export industries and employment-intensive sectors.

Second, redirect excess bank liquidity to productive investment in the private sector, with discipline in credit policies.

Third, to make business more efficient and cost-effective by speeding up VAT refunds, customs processing, licensing, connections to utilities and regulatory processes.

Fourth, ensure lower paid workers are safeguarded by regularly scheduled sectoral wage negotiations and specific measures to buffer them from necessary living expenses.

Fifth, promote investment in technology, energy efficiency, renewable energy, machinery and skills to promote productivity.

Sixth, transform compensation for the government to improved service for the public. The increased speed of decision making, increased digitisation and better services from government to business can all help cut investment costs.

Match Higher Demand with Higher Supply

Six complementary measures might be a part of the new pay scale. Restore reliable industrial energy, especially for export industries and employment intensive industries first. The risk of inflation only remains. However, as the purchasing power of the wage increase increases, prices can rise, causing the benefit of the wage increase to be slowly reduced, and negatively impacting those not in the wage range the most. There is still a need for monetary discipline, but not just interest rates can be used to combat inflation. Too costly of credit may hinder just those investments that are required to expand supply. The more robust one is monetary and supply-side: Improve food supply chains, eliminate import bottlenecks, enhance competition, re-establish energy availability and allow businesses to ramp up production. The rule is simple - if there is more demand, there needs to be more supply as well.

Building a Government-Business Growth Compact

A wide-ranging government-business growth pact can be achieved via the new pay scale. Government can provide energy security, and policies that are known and stable; banks can mobilize the Tk 4.08 lakh crore surplus liquidity into productive industries and businesses will respond to it with investment, employment and improved wages. However, the private credit increased by just 4.47 percent and the gas shortfall was about one-third indicate the missing links. Now it is necessary to link higher pay to production, liquidity to investment, energy to industrial capacity and productivity to better wages. The new pay scale, if handled properly, can do something to boost business, safeguard those working on lower incomes and help disperse its benefits throughout the economy.

Major General (Retd.) Md. Nazrul Islam is the former Executive Chairman of BEPZA and former Executive Member (Planning) of BEZA. He is a PhD researcher focusing on technology, workforce transformation, and industrial competitiveness, and the author of the Zi-DoNa Trilogy.