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‘Public will foot the bill for pay raise,’ business leaders warn

Central Bank governor Riad Salameh, right, attends the joint committees meeting at the Parliament in Beirut, Monday, April 7, 2014. (The Daily Star/Hasan Shaaban)

BEIRUT: Business leaders reiterated their sharp criticism of the controversial salary scale Monday, warning that any hasty steps to raise wages at this moment would spell doom for the economy.

“The approval of the new salary scale is expected to cause a very bad impact ... on the entire economy and the stability of the Lebanese pound,” Nemat Ifram, president of the Association of Lebanese Industrialists said in a statement.

“We are not against giving public sector employees their full rights, but the salary scale must not be financed in a way that would pose an additional burden on the national economy,” he added.

Civil servants and public school teachers urged Parliament to expedite the endorsement of the proposed wage hike, which has been submitted to Parliament’s Joint Committees, threatening further industrial action if MPs did not endorse it.

Private school teachers joined a major protest on March 21 to reiterate their demands for a salary raise. Hanna Gharib, head of Secondary Teachers Associations, confirmed that teaching staff would continue protesting until the new salary scale was approved, threatening to boycott official exams and start an open strike.

Finance Minister Ali Hasan Khalil is planning to introduce new taxes in his 2014 draft budget in order to finance the proposed salary scale, which is expected to cost the government more than $1.6 billion each year.

“The approval of the salary scale will be translated into an increase in VAT and other taxes, which will place an additional burden on citizens because they will be paying it from their own pockets,” Ifram said. “So the salary raise is useless.”

Ifram argued that such a measure would be accompanied by an increase in the price of commodities and a marked drop in the public’s purchasing power.

Ifram said the growth rate in 2013 did not surpass 1.5 percent, while the public debt increased by 7.5 percent.

“This is a scary,” he said, “especially that the deficit reached 50 percent of the budget, meaning that Lebanon today is borrowing half of its budget.

He added: “What will the situation be like after approving the salary scale?”

Echoing similar fears, the head of the Lebanese Insurance Association Asaad Mirza said that the salary scale of 1992 had a very bad impact on the exchange rate of the Lebanese pound to the U.S. dollar, at one point reaching LL3,000.

“The economic situation was much better back then but the salary scale had a really negative impact on the Lebanese pound,” he said. “What would be the impact of such a measure in the midst of the current deteriorating economic situation?

The President of the Beirut Traders Association Nicolas Chammas earlier voiced opposition to proposed tax hikes that were being discussed by the parliamentary joint committee in order to finance the salary increase.

“Such a measure could have a catastrophic impact on the Lebanese economy,” he said.

“Rather than increase taxes, it would be more logical to fight corruption and tax evasion.”

 
A version of this article appeared in the print edition of The Daily Star on April 08, 2014, on page 5.

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Summary

Private school teachers joined a major protest on March 21 to reiterate their demands for a salary raise. Hanna Gharib, head of Secondary Teachers Associations, confirmed that teaching staff would continue protesting until the new salary scale was approved, threatening to boycott official exams and start an open strike.

Finance Minister Ali Hasan Khalil is planning to introduce new taxes in his 2014 draft budget in order to finance the proposed salary scale, which is expected to cost the government more than $1.6 billion each year.

Echoing similar fears, the head of the Lebanese Insurance Association Asaad Mirza said that the salary scale of 1992 had a very bad impact on the exchange rate of the Lebanese pound to the U.S. dollar, at one point reaching LL3,000 .


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