Lebanon’s salary dilemma: Public sector demands clash with an empty treasury

Report by Lea Fayad, English adaptation by Karine Keuchkerian 

When will Lebanon break out of the same vicious cycle? Public sector workers are demanding salary increases, and they are justified in doing so. The problem, however, is that these demands are being made of a state that lacks the financial capacity to pay.

By the numbers, Lebanon’s public sector — including active employees and retirees — comprises about 330,000 people. The annual wage bill stands at roughly $3.1 billion, nearly half of the state budget, which does not exceed $6 billion.

In the recently approved budget, the government set revenues equal to expenditures at around $6 billion. Any additional dollar in spending that is not matched by a corresponding dollar in revenue would immediately return the country to a deficit.

The key question, however, is whether there truly is no solution — or whether solutions exist but are simply not being implemented.

In reality, there are several ways to increase state revenues without burdening citizens through higher taxes. One option is tackling tax and customs evasion. According to the International Monetary Fund (IMF), evasion deprives the treasury of approximately $4 billion annually. 

While the Finance Ministry has taken some steps, such as installing scanners at the port, the resulting increase in revenues has not exceeded 35 percent, leaving significant room for improvement, according to ministry sources.

Another avenue is the collection of fees on public maritime properties. Proper enforcement could generate up to $120 million annually, compared with just $34 million currently collected, particularly since the pricing per square meter remains far below the assets’ real value.

There is also the need to enforce laws already in place, including the traffic law, fees on special license plates, and a fair tax on foreign labor.

At the same time, unnecessary expenditures should be reduced. The state pays about $52 million annually in rent for public buildings, despite owning properties that could be used instead.

Automation and the merger of overlapping public administrations are also essential to reducing waste and improving productivity in the public sector.

Ultimately, solutions exist but require political will. The Finance Ministry says steps will soon be taken to reduce spending and save funds, stressing that these reforms are the only path to restoring confidence, unlocking new funding from the IMF and other sources, and increasing state revenues.

Still, promises of reform are frequent, as is talk of imminent measures. The question remains whether this time they will translate into tangible action on the ground.