This is good news.
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Burma lifts officials’ pay by up to 1200%
Amy Kazmin
Financial Times
26 March 2006
Burma’s military regime is increasing the salaries of its poorly paid civil servants and armed forces by between 500 and 1,200 per cent this year, a move analysts warn will worsen inflation and add to pressure on the nation’s currency.
The sharpest increases will benefit the highest-ranking officials and officers, whose salaries will increase to 120,000-200,000 kyat ($100-$166) per month, up from the previous 10,000 to 16,000 kyat, the Financial Times has learned.
The salaries of the lowest ranking officials will rise to 15,000 to 20,000 kyat per month, up from 3,000 to 3,500 kyat, an official told the FT.
Burma’s civil servants have received pay raises just three times since 1989 – by increments of 120 per cent, 26 per cent, and 500 per cent.
Economic analysts acknowledge that most civil servants are unable to survive on their current paltry salaries, a problem that drives them to seek other sources of income to supplement their earnings, and has contributed to corruption.
However, economists have expressed concern that the sheer magnitude of the sudden wage rises will trigger an immediate rise in the prices of basic commodities, adding to the woes of ordinary Burmese citizens already hit by the abrupt end of hefty fuel subsidies just six months ago.
“Civil servant salaries have been kept at such a low level for such a long time, they deserve an increase,” said one Rangoon-based economic analyst, who asked not to be identified.
“But it is going to add to the inflationary pressure. The traders will take this as a sign to increase prices. They have a long history of this: whenever government salaries go up, the prices of essentials go up.”
The analyst also expressed concern that the wage increase – which takes effect on April 1 – could put pressure on the fragile banking system if depositors, anticipating a rapid depreciation of the domestic currency, try to withdraw large volumes of kyat to convert into hard assets, such as gold or dollars.
“At times of uncertainty, people want to put their money into safe assets, like gold,” the analyst said. “That is the scary thing. We are waiting to see what happens.”
Although Burma’s Ministry of Finance and Revenue signed the order authorising the salary increase on Saturday, the country’s state-controlled media had yet to announce the increases as of yesterday.
But weekend rumours in Rangoon of the imminent increase sent gold prices spiralling upwards, while the kyat weakened against the dollar.
Burma’s military junta tends to cope with economic problems by making dramatic policy shifts, rather than phased changes.
In October, for example, the junta suddenly ended all fuel subsidies, leading to an immediate nine-fold increase in fuel prices.
Around 1m of Burma’s 53m people, including members of the armed forces – who are thought to number about 400,000 – will receive the pay increases.
