BEIRUT

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Lebanon hunts for ways to fund wage hike

The Finance Ministry building is seen in Beirut, Lebanon, Monday, Jan. 16, 2012. (The Daily Star/Mahmoud Kheir)

BEIRUT: The Finance Ministry is looking for new revenue streams to fund a wage hike for public sector employees, Economy Minister Nicolas Nahas said Monday.

Nahas added the Finance Ministry is considering the appropriate funding sources in light of the current economic slowdown.

“[Finance Minister] Mohammad Safadi is studying potential state revenues in light of the economic situation to avoid a new financial crisis,” Nahas told a local news website.

Allocating funds for the salary hike is set to cost the treasury an additional $1.2 billion and subsequentlycause the deficit to rise higher than the 26 percent projected at the end of 2012.

Lebanon’s 2012 GDP – previously forecasted at 3 percent by the International Monetary Fund – is not expected to be higher than 2 percent due to domestic instability and regional uncertainty sparked by the ongoing crisisin neighboring Syria.

The private sector has argued against implementing the wage increase, citing slowing economic growth and the high debt-to-GDP ratio.

The wage hike would require the government to either raise taxes, which would further slow the economy, or incur additional debt, widening the budget deficit.

Among the proposals mulled over by the ministers to fund the salary hike are taxes on real estate investment, raising taxes on interest of customer deposits from 5 percent to 7 percent, and fines on illegal seashore properties built on public properties during the Civil War.

Prime Minister Najib Mikati said Friday that additional taxes, fines and fees to finance the new salary scale would be applied to sectors far removed from the daily lives of most citizens.

Sources say the prime minister will likely issue treasury bills to finance the salary increase.

Such a move would cause the deficit to spiral and increase the public debt by $1 billion a year.

 
A version of this article appeared in the print edition of The Daily Star on September 11, 2012, on page 5.

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