KUALA LUMPUR, May 8 -- Economists believe the public will watch closely how Prime Minister Datuk Seri Anwar Ibrahim's government plans to fund the record rate pay hike for its huge public sector that is set to add RM10 billion more to its already big wage bill.

Anwar announced the hike at a symbolic Labour Day celebration last week, where he suggested the increment would likely be more than 13 per cent as part of a wider civil service pay system revamp that would see the floor rate raised to a minimum of RM2,000.

He touted it as the highest increment to date although some of his critics have challenged the claim. The announcement immediately fuelled speculation about where the money to foot the bill would come from, and if it could affe...