In a significant move aimed at bolstering the Malaysian economy and improving the lives of civil servants, Prime Minister Anwar Ibrahim announced a substantial salary increase. This revision to the remuneration program, the first in over a decade, will see a substantial injection of funds into the economy.
During his speech in Putrajaya on Friday, the Prime Minister detailed the salary increases. Mid-level civil servant professionals will receive a 15% wage hike, while top civil servants will see a 7% increase. The implementation of these increments will be phased in over 2025 and 2026.
This move comes as the government is actively pursuing fiscal reforms. These reforms include fuel subsidy cuts and higher taxes, alongside increased financial assistance for those in need. The salary adjustments are expected to cost the government over 10 billion ringgit ($2.25 billion) annually, with further details to be unveiled in the 2025 budget.
While the government anticipates increased consumer spending due to the salary hike, the nation also faces rising inflation, particularly in the latter half of the year, following diesel subsidy cuts in June. The central bank, however, has stated that the impact of these cuts on inflation is expected to be manageable.
The potential economic benefits of the salary increase are significant. Tan Sri Soh Thian Lai, President of the Federation of Malaysian Manufacturers, believes that the increased disposable income for civil servants will lead to higher consumer purchasing power. This, in turn, could stimulate economic activity.
“With civil servants having more money to spend, it could boost consumer demand, leading businesses to increase production to meet this demand. This, in turn, can potentially create more jobs and spur economic growth,” Soh Thian Lai told The Star.
He further explained that the higher spending by civil servants would create a multiplier effect, with increased consumer spending translating to higher demand for raw materials and services from suppliers.
Malaysia’s economy has been performing well, with an expected growth of nearly 5% this year. The second quarter (April-June) witnessed a stronger-than-expected performance, with GDP increasing by 5.9%, surpassing the initial estimate of 5.8%. The economy also showed a 2.9% expansion from the first quarter.
