Navigating challenges: How Lebanon implements salary increases for public sector employees

The Lebanese government has approved increases in the salaries of active and retired public sector employees. 

How were the increases implemented? 

The increases stipulated that retirees and military personnel in active service in the military ranks would receive three additional salaries on top of what they were previously receiving. 

This means that a military personnel whose base salary was two million LBP and had received a previous increase of three salaries would now receive a salary of 12 million LBP. 

It's worth noting that this amount will be paid at the current official exchange rate of 137 US dollars.

 

The increase also granted other employees in active service in the public sector, including administrations, institutions, and municipalities, four additional salaries on top of what they previously received, with the condition of attending work for fourteen days.

According to the current exchange rate, an employee who used to receive 2 million LBP will now receive 14 million LBP or 160 dollars. 

The government decisions also stipulated giving public sector employees 450,000 LBP as a transportation allowance for each working day. 

In addition to the salary increases, the government approved 450 billion LBP monthly for the State Employees' Cooperative, which deals with healthcare and medical services, and 150 billion LBP for military healthcare for the Internal Security Forces. 

 

The cost of these monthly increases amounts to approximately 4.1 trillion LBP.

 

How will these funds be secured?

 

It would depend on the specific financial arrangements made by the government. It could involve various means, such as reallocating budget allocations, obtaining loans, issuing bonds, or implementing economic reforms to generate revenue. The government would need to carefully manage its financial resources to ensure the availability of funds for these increased expenses while also addressing Lebanon's broader economic challenges.

Sources following up on the situation confirm that resorting to money printing is not feasible and not beneficial. 

It is also unlikely that new taxes or fees will be imposed, and funding for these increases will come from existing taxes and fees. 

There is a possibility of raising the customs dollar rate to 60,000 LBP or even higher in the coming weeks. 

However, many are concerned that raising the customs dollar rate may lead to more smuggling and customs evasion, resulting in potential loss of expected revenues for the government.

The salary increases in Lebanese lira for the public sector and their payment in dollars at Sayrafa rate raises serious concerns about the potential return of the dollar exchange rate in the black market to higher levels if the Central Bank accumulates Sayrafa dollars from the black market to pay salaries and essential obligations in fresh dollars.