Malaysian PM Confident in Implementing Civil Servants' Salary Hike through Sound Financial Management

Malaysian Prime Minister Datuk Seri Anwar Ibrahim expressed confidence in the government's ability to implement a substantial salary increase for the nation's 1.6 millioncivil servants, attributing this to sound financial management practices. Anwar, who also serves in the capacity of Finance Minister, emphasized that the decision to raise civil servants' salaries is a reward for their hard work and discipline.

Why this matters: This salary increase has significant implications for Malaysia's economy, as it will affect the spending power of a large portion of the workforce and potentially influence inflation rates. Moreover, the government's ability to implement this increase while managing the nation's debt and fiscal deficit will be closely watched as a test of its financial management capabilities.

On May 1, 2024, during the Labour Day celebration in Putrajaya, Anwar announced a pay rise exceeding 13% for civil servants, effective December 1, 2024. This increase, which is part of the revision of the Public Service Remuneration System (SSPA), will ensure a minimum pay of RM2,000 for civil servants, up from the current minimum income of RM1,795 per month. The salary adjustment is expected to involve an allocation of over RM10 billion and will be tabled in Budget 2025 this October.

Addressing concerns about the nation's financial stability, Anwar stated, "But what about the debt... of RM1.5 trillion, the 5.6 per cent (fiscal) deficit? It has come down to 5 per cent this year and insyaAllah we will bring it further down next year, we will be able (to increase the civil servants salary) because we manage the finances properly by being rigid." The Prime Minister's assurance highlights the government's commitment to fiscal responsibility while prioritizing the welfare of civil servants.

The proposed salary hike has been met with both praise and criticism. Ajulahin Japin, chairman of the Sabah Congress of Union of Employees in the Public and Civil Services (CUEPACS), expressed appreciation to the Prime Minister, stating that the increase represents a significant relief for civil servants in Sabah who have been burdened by rising prices and cost of living. Japin also noted that the new minimum wage of RM2,000 is close to the living wage benchmark set by Bank Negara Malaysia (BNM) of RM2,700.

However, some opposition figures, such as Machang MP Wan Ahmad Fayhsal Wan Ahmad Kamal, have criticized the announcement, calling it "hollow" due to the increasing price of goods. In response, Home Minister Datuk Seri Saifuddin Nasution Ismail challenges Wan Ahmad Fayhsal and his Perikatan Nasional colleagues to make a stand on whether they support or are against the proposed salary adjustment for civil servants.

Saifuddin Nasution also denied claims that the proposed pay rise was a campaign tool for the ongoing Kuala Kubu Baharu (KKB) by-election, stating, "If looked at from the timeframe of the announcement, their own question will be answered." The Home Minister emphasized that the Unity Government had started the revision of the SSPA some time ago, and the announcement was made in conjunction with the 2024 Labour Day celebration.

The salary increase for civil servants is expected to have a significant impact on the nation's economy, with approximately 10% of the total workforce set to benefit from the revised remuneration system. Dato Sim Kiang Chiok, advisor to the Sarawak Housing and Real Estate Developers' Association (Sheda), notes that while the salary increase may pose challenges for the private sector in retaining their workforce, it will also stimulate demand for goods and services as a result of the increased spending power of civil servants.

However, Sim also cautions that failing to match the increase in salary with productivity gains may lead to inflation and a reduction in the country's wealth. He anticipates a rise in wage-price inflation, affecting both public and private sectors, since the increase in disposable income among civil servants is likely to lead to higher prices. Sim emphasizes the need for productivity gains to match the salary increase to ensure economic stability.

The nation awaits the tabling of Budget 2025 in October, and the proposed salary increase for civil servants remains a topic of intense discussion and debate. Prime Minister Anwar Ibrahim's confidence in implementing the pay hike, backed by sound financial management, has earned support from

Key Takeaways

• Malaysia's PM Anwar Ibrahim announces 13%+ salary increase for 1.6 million civil servants.
• New minimum pay will be RM2,000, up from RM1,795, with an allocation of over RM10 billion.
• The increase will be tabled in Budget 2025 and is expected to stimulate demand and economic growth.
• However, experts warn that it may lead to inflation if not matched with productivity gains.
• The government's ability to implement the increase while managing debt and fiscal deficit will be closely watched.