Malaysian civil servants get a $2.3 billion bonanza, to get pay hike of up to 15%

In the first revision to the remuneration program in over a decade, Malaysian Prime Minister Anwar Ibrahim announced a significant salary increase for civil servants by over 10 billion ringgits ($2.3 billion).

In his speech in Putrajaya on Friday, the Prime Minister said that mid-level civil servant professionals will receive a 15 per cent wage hike, while top civil servants will get a 7 per cent increase. The salary increments will be implemented in phases in 2025 and 2026, he said.

The move comes as the government looks to implement fiscal reforms, including fuel subsidy cuts and higher taxes while increasing financial aid to the needy.

The salary adjustments are expected to cost the government more than 10 billion ringgit ($2.25 billion) a year, with further details to be announced in the 2025 budget, he said.

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Inflation is expected to trend higher in the second half of the year following diesel subsidy cuts in June, though the central bank said on Friday the impact is likely to remain manageable.

Higher salaries could mean an increase in disposable income for civil servants and higher consumer purchasing power, which can stimulate overall economic activity, Federation of Malaysian Manufacturers president Tan Sri Soh Thian Lai told The Star, adding that the move can potentially boost the economy,

“With the 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.

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“In addition, the higher spending by civil servants would create a multiplier effect where the increased consumer spending also translates to higher demand for raw materials and services by the suppliers,” he told The Star.

Malaysia’s economy is expected to grow nearly 5% this year, following a stronger-than-expected performance in the second quarter. According to data from the central bank and statistics department, the country’s gross domestic product (GDP) increased by 5.9% in the second quarter (April-June) compared to the same period last year.

This revised figure surpasses the initial estimate of 5.8%. Additionally, the economy showed a 2.9% expansion from the first quarter.