Pay Revision Subject to Economic Assessment and Government Procedure

Growing concerns over rising living costs have brought pay revision back into the national spotlight, with the government indicating that a salary review for public servants is expected in the near future, subject to an assessment of the country’s economic conditions.

The prospect of a new pay revision was discussed during the closing press conference of the Fifth Session of the Fourth Parliament, where Deputy Speaker of the National Assembly, Sangay Khandu, said that the government is working toward initiating the process.

For many civil servants, the discussion comes less than three years after the implementation of the Pay Revision Act 2023, which increased salaries across the public sector by between 55 and 74 percent. At the time, the revision was widely welcomed as a major intervention to improve living standards and address long-standing concerns over public sector compensation.

However, a combination of rising inflation, increasing food prices, fuel costs and higher household expenses has led many public servants to argue that a significant portion of those gains has already been eroded.

Bhutan’s inflation rate is projected to reach 5.2 percent in the current fiscal year and 5.6 percent in the next. In January this year alone, inflation climbed to 5.8 percent, almost double the rate recorded a year earlier, mostly attributed to higher food and fuel prices, as well as the transition to the Goods and Services Tax (GST).

Deputy Speaker Sangay Khandu said the government is actively considering the matter but emphasized that constitutional procedures must first be followed. “As far as I know, the government is working on it. However, there is a process a Pay Commission needs to be established first, which will then assess the feasibility and recommend to the Cabinet and Parliament on the possible raise,” he said.

“Although it could not be tabled during this session, the government is working towards it, and it is expected to come soon,” he added.

Under the Constitution, an autonomous Pay Commission must be constituted periodically upon the recommendation of the Prime Minister. The Commission is mandated to review salaries, allowances and benefits of public servants while taking into account the country’s economic conditions, fiscal sustainability and broader development priorities before making recommendations to the government.

The issue of pay revision has also featured prominently in parliamentary discussions and remains one of the government’s key election pledges. During Question Hour sessions in Parliament last year, several members raised concerns about the impact of inflation on public servants. At the time, Finance Minister Lekey Dorji stated that while the government recognizes the challenges faced by civil servants, any salary revision must be carefully studied to ensure long-term fiscal sustainability.

Meanwhile, expectations are growing. Pema Dorji, a civil servant based in Thimphu, said that while the 2023 pay revision provided significant relief initially, rising prices have steadily increased pressure on household budgets. “Rent, groceries and transportation costs have all gone up. The salary increase helped at first, but the cost of living has continued to rise. Many families are finding it difficult to save or manage unexpected expenses,” he said.

Similarly, Sonam Choden, a teacher in Punakha, said inflation is affecting public servants across different sectors. “Teachers, nurses and other civil servants are all facing the same challenges. We understand that the government must consider the economy, but people are hoping that the review process will move forward soon,” she said.

Another civil servant, Ugyen Wangchuk, said that while salary revision is important, it should be accompanied by broader measures to address rising living costs. “A pay revision would certainly help, but controlling inflation and reducing the cost of essential goods is equally important. Otherwise, salary increases may not have the desired impact in the long run,” he said.

The debate comes at a time when Bhutan’s economic indicators present a mixed picture. On one hand, the economy has shown strong signs of recovery. According to the government, Gross Domestic Product (GDP) has grown by 30 percent during the first two years of the 13th Five-Year Plan, increasing from Nu 280 billion to Nu 364 billion. The country has also witnessed a significant improvement in public finances, with a projected fiscal deficit of Nu 56 billion turning into an anticipated surplus of Nu 20 billion.

International financial institutions have also expressed optimism about Bhutan’s growth prospects. The International Monetary Fund projects economic growth of 7.4 percent this fiscal year, supported by hydropower expansion, tourism recovery and ongoing infrastructure investments. Foreign currency reserves currently stand at around USD 1.1 billion, providing an additional buffer for the economy.

However, several challenges remain. Inflation continues to rise, the current account deficit remains substantial, and increasing debt servicing obligations could place pressure on public finances in the coming years. “These competing realities mean that while the economic environment may be improving, any decision on pay revision will likely depend on whether the government believes the gains are strong enough to sustain higher recurrent expenditure over the long term,” an economist based in Thimphu said.

For now, public servants are watching closely as the government moves toward establishing the Pay Commission. While expectations are high, the timing and scale of any salary revision will ultimately depend on the Commission’s assessment of Bhutan’s economic capacity and fiscal outlook.

Until then, the government’s promise that a pay revision is coming “soon” offers hope, but many civil servants say they will be looking for clearer timelines as rising living costs continue to weigh on household budgets across the country.

Tashi Namgyal, Thimphu

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