May 26, 2024

(Bloomberg) — Malaysia will increase civil servants’ salaries by more than 13% from December, as Prime Minister Anwar Ibrahim looks to counter rising living costs and a weak currency.

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More than 10 billion ringgit ($2.1 billion) will be allocated for what is set to be the biggest wage bump for government staff in the nation’s history, Anwar said in Kuala Lumpur on Wednesday. Civil servants will also get a minimum monthly income of more than 2,000 ringgit, he added, from 1,795 ringgit currently.

Malaysia’s economy quickened by the most in a year during the January-March period from a year ago, signaling that a firmer recovery is underway in the Southeast Asian nation. However, the ringgit continues to trade near a 26-year low, making imports more expensive.

There are concerns that price pressures may flare up on Anwar’s planned reforms to strengthen the country’s fiscal position through more targeted assistance and higher taxes. The government plans to cut petrol subsidies this year to narrow the budget deficit at a time when voters are grappling with higher living costs.

Read more: Malaysia to Push Ahead With Long-Awaited Subsidy Cuts in 2024

Anwar said the pay hike would result in a “manageable” rise in price pressures, at most. “The country’s inflation rate is the lowest in Asia, so we expect that a small increase may be acceptable,” he said.

The government will also raise salaries in stages to manage its inflationary effect, added Anwar, who doubles as finance minister.

His announcement comes ahead of a by-election on May 11 for a state seat in Malaysia’s most-populous Selangor region. It’s a four-cornered fight between Anwar’s Pakatan Harapan coalition and candidates from the opposition parties.

(Updates with further details in second and fifth paragraph)

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