It cannot be confirmed that the file of salaries for public sector employees has been completely and accurately folded after the government approved in its Tuesday session, in addition to the previous increase of paying two additional salaries, paying four times the salary received by public sector employees, contractors, and wage earners.
The reason is the ambiguity surrounding how the cost of this new pay scale will be covered and the fear of being unable to secure the necessary funds, similar to when the increase in two salaries was approved a few months ago.
This article was originally published in, translated from Lebanese newspaper Nidaa al-Watan.
It is worth mentioning that the Ministry of Finance is relying on covering the cost from the revenues of the customs dollar, which was raised to 60,000 LBP, then to Sayrafa rate next month, and the (minimal) fees intended to be collected from maritime properties.
Meanwhile, economists warn that these new taxes (customs dollar and maritime properties) could have a reverse effect in terms of increasing economic contraction and smuggling, as well as increasing inflation rates, which means that the bet of those in power, as usual, is like fishing in the sea and escaping forward.
The 3-4 fold increase in salaries
According to the government's decision, this temporary compensation should be at least eight million LBP per month in terms of numbers and after a four-fold increase in public sector salaries.
It was also decided to pay three times the basic salary and supplements to military personnel, with a minimum of seven million LBP per month for this temporary compensation.
Three times the pension for retirees in all ranks who receive a pension was also paid. The transportation allowance was also adjusted to 450,000 LBP daily, with a minimum requirement of 14 days of attendance at work.
The government also approved raising the minimum wage in the private sector to 9 million LBP and 250,000 LBP for a transportation allowance.
Not ruling out contraction
Sources from the Ministry of Finance confirm to "Nidaa al-Watan" that "the Ministry of Finance is counting on tax revenues from customs dollar and maritime properties to cover the expenses of the salary scale, estimated at about 6,500 billion LBP per month, while the cost of the latest addition is 4,000 billion LBP per month."
They emphasize that "Minister Youssef Khalil has taken into consideration the possibility of an economic contraction resulting from the increase in customs dollar, but it is supposed that about 6,000 billion LBP per month will enter the treasury from customs dollar, and about 20 million dollars annually from maritime properties, which is equivalent to about 2,000 billion LBP."
Chammas: The cost is $80 million annually
In the economic balance, economic expert Ghassan Chammas believes, in an interview with "Nidaa al-Watan," that "the cost of the new salaries will not exceed $80 million annually at the black market exchange rate, and this amount is not difficult to secure, given the payments made in multiple sectors."
He pointed out that "the coverage of the cost of this new salary scale will be largely through customs dollar and other state revenues. Regardless of our opinion on this increase, the liquidity in the hands of citizens will ensure a better economic cycle. I do not believe there will be any difficulty or fear about how to finance this second pay scale."
Beware of Currency Printing
"The lesser evil and the hardest one is resorting to currency printing, and that's when disaster happens, as it will lead to a larger injection of liquidity into the market, resulting in an increase in the cash supply among the citizens. We will then return to the spiral of the dollar exchange rate increase in the black market," He added.
He also considered that "in case this scenario happens, it is additional evidence of the short-sightedness of those responsible for the financial and economic affairs in Lebanon, and this may happen and is not unlikely, because the taken decisions are often taken abruptly and without careful consideration."
Salaries in "Sayrafa" dollars
"Will public sector employees be allowed to receive their salaries in Sayrafa dollars lower than what it currently is?" Chamas asked.
"Personally, I am in favor of this proposal because this method can stop the inflation that may result from this increase, as the introduction of dollars instead of Lebanese liras will allow employees to sell these dollars in the black market," he added.
Chammas stressed that such a thing "will achieve two objectives: firstly, increasing salaries by a certain percentage, and secondly, absorbing the Lebanese lira and moving it into the consumer market. This means an increase in the dollar supply and a reduction in the Lebanese lira supply in the market, which allows for the relative stability of the dollar exchange rate in the black market."
The fees for maritime properties are low
He also considered that "taking this decision is not difficult, but rather an administrative decision that the Central Bank of Lebanon can make without the need for a circular. What happened on Tuesday was a dismantling of the problem."
"In the first stage, the increase was approved, and then other decisions can be made by the Central Bank to avoid creating problems," he added.
Chammas emphasized that "there is no hope in relying on the returns of maritime properties to cover the expenses of salary increases, neither before nor during the crisis. The amount obtained from it is modest compared to the cost of the new salary scale for about 400,000 employees in the Lebanese state, especially since the taxes imposed on it are very low compared to its actual value."
He concluded by saying that "raising the customs dollar will help in filling some of the state's deficits in LBP, as the state is still collecting many fees based on the exchange rate of 8,000 and 15,000 Lebanese pounds."