Dearness allowance could fuel inflation: CPD

Giving a dearness allowance to public servants, replacing the existing 5 percent special incentive from FY2025-26, could risk fuelling inflation, the Centre for Policy Dialogue (CPD) warned today.

"This proposal comes at a curious time," said Fahmida Khatun, executive director of the CPD, at a press briefing held at the think tank's office in Dhaka to unveil its review of Bangladesh's economy in FY2024-25.

Citing media reports, she said the move is expected to increase public expenditure by nearly Tk 7,000 crore, which would add further fiscal pressure.

"While this allowance may offer some relief to public servants amid persistently high prices of essentials, concerns remain over its potential inflationary impact," Fahmida said.

She also pointed out that the broader workforce—particularly those in low-paying private sector jobs and the informal economy—continues to be overlooked in the government's support framework.

Bangladesh has been grappling with persistent inflation for more than two years. The 12-month average inflation stood at 10.21 percent in April, according to Bangladesh Bank data.

Although point-to-point inflation eased slightly in recent months, it remained above 9 percent for the 26th consecutive month.

"The timing and nature of this proposed allowance raise important questions about the government's priorities," Fahmida added.

"It remains to be seen whether the measure is primarily intended to appease and retain support from public sector employees, especially within the bureaucracy," she said.