Malaysia's Civil Servants Get Pay Raise As Ringgit Slides

In a move to support civil servants amidst economic fluctuations, Malaysian Prime Minister Anwar Ibrahim has introduced a substantial pay raise of over 13%, a historical high, which will be effective from December. 

This announcement comes as Malaysia faces several economic pressures, including a declining ringgit, which has softened nearly 4% against the US dollar this year alone. 

February saw the ringgit hit a 26-year low, plunging to 4.7965 against the dollar, levels unseen since the 1998 Asian financial crisis. 

This depreciation benefits exporters by making Malaysian goods cheaper on the international market, but it simultaneously escalates the cost of imports like food and fuel, directly impacting household budgets.

The economic growth rate of Southeast Asia’s fifth-largest economy also reflects these challenges. After peaking at 8.7% in 2022—the highest in 22 years—growth slowed to 3.7 % in the following year, falling short of government expectations. 

Preliminary estimates suggest a slight recovery, with 3.9% GDP growth in the first quarter of the current year, and projections anticipate growth of 4-5 % in 2024.

Besides addressing public sector wages, Anwar, who also serves as the finance minister, urged private companies profiting significantly to boost wages for their employees, fostering a broader economic equilibrium. 

This approach not only aims to fortify public finances by potentially increasing tax revenues and reducing subsidies but also to ensure a fair distribution of economic gains across different sectors.