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Every day of strike costs state $18M: economist

  • File - Civil servants and public school teachers rally outside the Tourism Ministry in Hamra, Tuesday, May 13, 2014. (The Daily Star/Mohammad Azakir)

BEIRUT: The ongoing civil servants strike will have dire effects on the government’s revenues and could widen the budget deficit if the salary scale issue is not solved soon, economists said Thursday.

“Every day of strike by the civil servants and government employees will cost the treasury $18 million in lost taxes,” economist Ghazi Wazni told The Daily Star.

Public school teachers and civil servants have been staging strikes and sit-ins over the past six months to press parliament to pass the salary scale.

The Union Coordination Committee has threatened to cripple the country and close every government department if lawmakers procrastinate in implementing its demands.

Some lawmakers from the Future Movement fear that any substantial increase in the wages of civil servants and public school teachers could put more pressure on the Finance Ministry and increase the inflation rate.

The Future movement insisted on drastic reforms before considering any wage increase.

Wazni explained that according to figures by the Finance Ministry, tax revenues reached around $6.5 billion in 2013. Spread out over the 365 days in a year, that means the state could lose around $18 million in tax revenue for each day that a strike takes place in all government departments.

Not all government departments have complied with the strike Thursday, although most of the employees who remained in offices refrained from performing their duties in a show of defiance.

Sources told The Daily Star that many taxpayers were unable to pay their taxes at the revenue department because the staff refused to process their papers and collect the money.

The deliberate delay in collecting taxes has put the taxpayers in a difficult position, as the law stipulates that failure to pay taxes on time will incur fines.

“Some of the taxpayers who could not pay their taxes on time were forced to pay the penalty,” Wazni said.

He added that the strike also affects the ability of the state to pay the cost of debt servicing, which is around $11 million a day.

Rock Muhanna, the dean of business and economics at Sagesse University, stressed that the strike has further exacerbated the economic problems of the country, which recorded GDP growth of 1.5 percent in 2013.

“We are now living in a triple cost on the economy. The first cost pertains to the presence of the Syrian refugees in Lebanon, which is costing Lebanon 3-4 percent of its potential GDP growth each year.

“The second issue is the debate over the salary scale, which has caused inflation to rise even before implementing the bill, and if it is approved the GDP growth will shrink by 2 percent.

“The third issue is the void in the presidency. For now the impact of the vacuum in the presidency is limited, but the longer it lasts the GDP growth will become lower,” Muhanna said.

He added that the strike civil servants was especially likely to deal a blow to growth if it persisted.

“I am afraid that the GDP growth in 2014 could drop to 1 percent and even worse if all these elements are not solved soon,” Muhanna said.

Wazni and Muhanna stressed that the strikes and the political deadlock will gravely affect the cost of doing business in Lebanon.

“Investors and businesses will also be affected by these strikes and this means that we are losing an opportunity to attract investments to the country.” Muhanna said.

A source at the Finance Ministry admitted that the debate over the salary scale has not led to any breakthrough, and this could encourage the public school teachers and civil servants to escalate industrial action.

 
A version of this article appeared in the print edition of The Daily Star on July 04, 2014, on page 5.
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Summary

The ongoing civil servants strike will have dire effects on the government's revenues and could widen the budget deficit if the salary scale issue is not solved soon, economists said Thursday.

Public school teachers and civil servants have been staging strikes and sit-ins over the past six months to press parliament to pass the salary scale.

Rock Muhanna, the dean of business and economics at Sagesse University, stressed that the strike has further exacerbated the economic problems of the country, which recorded GDP growth of 1.5 percent in 2013 .

For now the impact of the vacuum in the presidency is limited, but the longer it lasts the GDP growth will become lower," Muhanna said.

He added that the strike civil servants was especially likely to deal a blow to growth if it persisted.

Wazni and Muhanna stressed that the strikes and the political deadlock will gravely affect the cost of doing business in Lebanon.


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