Dhaka: Bangladesh Finance Minister AMA Muhith on Sunday said the government is working on a new mechanism to adjust the salaries of civil servants on an annual basis based on the rate of inflation.

"It is a suggestion, not decision, if the rate of inflation is four percent, it means no increase, only when inflation exceeds five percent, pay hike will be considered," he told the journalists after a meeting with Commerce Minister Tofail Ahmed and Planning Minister AHM Mustafa Kamal at the Finance Ministry in Dhaka. 

According to the new pay scale, those who are in Grades 20 to 6 will get increment at the rate of 5 percent. For Grade 5, the rate will be 4.5 percent while for Grades 3 and 4 it will be 4 percent, and for Grade 2 it will be 3.75 percent of the basic.

Muhith said a cell should be formed with active participation of the Public Administration Ministry and it will submit a report within three months detailing how the annual pay hike mechanism will work. "The mechanism will be effective before the next national elections," he said.

In 2015, the government announced a new pay scale comprising 20 grades. The salary of the highest grade (Grade-1) is Tk 78,000 (fixed) and the initial basic of the lowest grade (Twentieth) is Tk 8,250.