The implementation of a minimum salary for government workers will have a direct impact of MVR 600 million on the state budget for 2022, the finance ministry said.
According to a decision made by the Minimum Wage Board last week, which is awaiting approval from the economic minister, the minimum wage for a civil servant in a permanent position is MVR 7,000 per month for six hours of work, or MVR 33.65 for an hour of work each day.
Economic Minister Fayyaz Ismail is currently reviewing the Board’s recommendations, with a final decision due next week.
In its fiscal and debt plan report, the finance ministry forecasted a total MVR 37 billion for the state budget for 2021, excluding pay harmonisation and the minimum wage.
The remuneration for government personnel was projected to be more than MVR 8 billion in the finance ministry’s report.
Furthermore, the pension would cost MVR 1.6 billion, according to the report, excluding changes triggered by the minimum wage. The amount of money spent on pensions will be influenced by how pay harmonization and the minimum wage are implemented.
An official from the finance ministry told a local news source that the changes brought about by the minimum wage are expected to have a direct impact ranging from MVR 400 million to MVR 600 million on the state budget for next year.
The estimated impact of the minimum wage on next year’s budget surpasses the MVR 500 million limit set forth in the finance ministry’s proposed budget for new policy initiatives.
To accommodate the changes brought about by the minimum wage, the government must either create room in the proposed budget by decreasing spending from other sources or submit a more costly budget for 2022.
The finance ministry stated in its report that if the state budget for 2022 surpasses MVR 40 billion, the government will have difficulty acquiring finances.
In addition to needing reduced expenditure to keep within the projected budget, the government is forced to manage medium-term expenses to repay the rising debts caused by the COVID-19 pandemic.
