The question of civil servants’ salaries is once again at the forefront of the economic scene, following the government’s approval on Wednesday, under strong pressure from strikes, of decrees aimed at increasing them. This decision reinforces fears of a repeat of the 2017 scenario when the wage scale law was passed.
Experts believe that the wage increase law, enacted in 2017, was one of the main factors behind the economic collapse that hit Lebanon at the end of 2019. These were increased without any prior plans or studies. This contributed to the state’s financial collapse.
With the new increases approved by the Lebanese government, the volume of expenditure allocated to public sector wages and salaries will amount to around 130,000 billion Lebanese Lira per year, or the equivalent of 1.46 billion US dollars. This constitutes around 45% of the budget for fiscal year 2024, which includes revenues worth 320,000 billion Lira and expenditures worth 295,000 billion Lira.
According to Caretaker Minister of Finance Youssef Khalil, the full cost of salary increases is included in the 2024 budget, as the government will rely on the taxes and fees it collects to secure salary funds. However, experts question the accuracy of the figures used ($1.46 billion) to approve the new salary increases. They point out that the government will almost certainly dip into the budget reserve, which will become zero or negative, causing it to lose spending flexibility in 2024. The government will thus be unable, according to the experts, to deal with any emergency.
In this context, the chairman of the economic organizations, former minister Mohammad Choucair, denounced “contradictory information and data, as well as a lack of clarity in the figures.” In an interview with the online news site Sky News Arabia, he called on the government to “announce the real cost resulting from the approved increases.”
Choucair questioned whether “the sums needed to cover the cost of the new salaries exceed the funds allocated to public sector salaries in the budget and budget reserve for 2024.” If so, “the government must reveal the method by which the increases will be financed, given the absence of internal and external funding for Lebanon,” he continued.
He warned against a replay of the 2017 scenario, recalling that “economic organizations had then been the first to warn of the catastrophic repercussions of this new salary scale, knowing that estimates of its cost were far lower than its actual cost.”
For his part, Mohammad Chamseddine, a researcher at Information International, estimated that “the repercussions of the increase in civil servants’ salaries will be more serious than those resulting from the approval of the salary scale in 2017.”
“Where are we going to find the money to finance these increases?” he questioned in an interview with Sky News Arabia.
Stressing that public sector employees “have the right to receive a decent salary,” Chamseddine pointed out that “the source of funding for the salary increases is still unknown.”
“It is difficult, at the moment, to determine the exact number of civil servants in state services and institutions,” he added. In this context, he noted that “some put the figure at 200,000 between military forces and civil servants, while others put it at 270,000.”
“This difference in figures leads to a discrepancy in the calculation of costs,” he stated.
Chamseddine estimated that “the Banque du Liban will advance the money needed to finance these salaries in US dollars and will be reimbursed by the government in Lebanese pounds.” But, as “the Lebanese state does not have enough pounds, despite the taxes and fees it collects, it will therefore resort to borrowing from the Banque du Liban,” he concluded.
