Will the massive salary revision raise the cost of living in Bhutan? It is the fear among many, particularly those outside the salaried group and in the private sector. But then will the cost of living remain the same if there was not a revision?

The cost of living or inflation is already on the rise even before the salary revision. To a large extent, our cost of living is not in our hands. It is decided outside the country. It depends on our imports – what and how much we import.

To put into context, the annual inflation was driven by food and, not surprisingly, by alcoholic and nonalcoholic beverages. In the latest inflation rate, food and beverages increased by 4.85 percent. A rise or fall in the price of goods, including essentials in India determines the cost of living here. Beyond India, any shake-up in the market where we bring our goods, by the shipload, matters too.

As a landlocked country entirely dependent on imports, what happens beyond our borders drives up the cost of living. We cannot stop imports. But we can choose what to import. Why should we import alcohol, the biggest killer in the country, when it is driving inflation? We complain about the price of rice and import wine or other beverages from as far as Australia and South Korea. While all will not buy, farmers and villagers occasionally love drinking “Kobug” – a non-alcoholic beer called Coolberg.

And we are importing everything, without concerns, when the country’s forex reserves are dwindling causing panic and resulting in bans and moratoriums.

Given the high cost of living, the salary raise is, obviously, necessary. What is needed is some introspection if the salary raise has an impact on the private sector. If we still believe in the private sector to create jobs and help economic growth, they should not be neglected. More than that, if the revision is to keep up with the rising cost of living, we cannot neglect those not getting a raise.

A salary revision can only happen when there are means to fund it. The government has Druk Holdings and Investment who will help fund the revision with Nu 4 billion. The rest do not have a DHI!

The pay revision has put everybody on their toes. The big question is how we keep up with the government. State-owned enterprises are tightening their belt if not looking for alternatives to keep up with the rest. Revise the salary or risk losing employees is the indirect threat as many expect a similar raise.

Some in the private sector are better. They will revise or increase the cost of goods and services they provide to keep up with the raise and offset the impact. A salary raise with a noble intention should not create division in society. There are means to check the cost of goods and services. Interventions through policies is one. The fear of rising housing costs, for instance, can be allayed through policies. If the cost of construction is cheaper, rents will be cheaper. If prices can be controlled, essentials will be affordable.

The value of the Ngultrum has depreciated by more than 50 percent in over a decade. What we can buy for Nu 58 in 2012 costs Nu 100 today. Not all Bhutanese will receive a raise to cover the difference.