6 December, 2008 - The reverberations of the Wall Street crash and the subsequent global financial crisis is showing it’s effect on the Pay revision.

According to reliable sources, the crisis was the main reason that has delayed the two pay revision reports of the Pay Commission and the Ministry of Finance (MoF) from being placed on the MOF website in October as promised earlier by the Prime Minister.

Equally important was the inadequate government resources for a substantive hike. Infact, in a recent cabinet meeting on November 25, it was discussed as to how even the moderated version of the finance ministry was unlikely to meet the feasibility tests.

The Cabinet is also known to have commented on the high probability of the economy being put in jeopardy if the government is not cautious.

“The global financial crisis is a concern since Bhutan is an ODA (aid) dependent country and our capital investment is from sources outside the country. As to how the crisis is affecting the revision we are discussing the overall effect of the crisis,” said Lyonchhen Jigmi Y Thinley.

On the availability of money for the revision, the Prime Minister said, “It is all about trade offs.”

The original Pay Commission Report had suggested a 40% to 77% raise for civil servants while suggesting much higher raises for Politicians, Judges and Constitutional Post Holders along with high allowances from Secretary upwards.

The government then gave the PC report to the MOF who came up with a pay proposal that has reduced the gaps and also the entire size of the original report after detailed research into revenue availability and other implications. “Given the costs involved the cabinet has noted that the feasibility or otherwise of the pay revision became clearer after its in-depth examination by the MOF” said a source.

“The problem is that due to the global crisis we have to find out the affect on our aid which is more then 20 percent of our outlay,” said an official. “The 10th Plan will have to be given priority, but at the same time the implementers or the civil servants must also be kept in mind,” he said.

Sources also said that the cabinet, in relation to the revision, will now be considering the scarcity of revenue and money needed for various construction projects for the 10th Plan. “Infact the cabinet has already decided and issued a letter to the MOF to reveal some roads that may not be given priority for a number of reasons. Some roads in the 10th Plan may now be held back due to felt shortage of money.”

“For revenue we are talking about sources of revenue but we cannot tax private sector and the people so we have to look at which areas we can increase the revenue without taxing,” said an official.

It is also learnt that the cabinet has looked into the percentage of teaching allowance. “Promoting quality education is a priority and that the percentage of teaching allowance will be need to looked into holistically,” stated a cabinet document. The cabinet has proposed expenditure cuts in the current budget to try and meet the revision, but it will avoid budget cuts in essential and live saving budget heads like drugs.

Sources say that the government shares deep concerns in the rising current expenditures, and agreed that respective ministers will look into judicious use of public funds. “Already all ministries have been asked to reduce expenditures in their ministries to meet the pay revision commitments.”

The cabinet had also felt that there were “excessive civil servants in agencies and ministries”.