BELIEF, أزمة الدين, العجز المالي, الملخص الاقتصادي

Lebanon Cannot Tax Its Way Out of a Wage Crisis

14:53 | 31 آب 2026LIMS output
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In February, the Cabinet approved a monthly allowance for public-sector employees, military personnel and retirees equal to six times their pre-crisis basic salary component. The raise did not go into effect back then, and on July 27, the finance minister proposed phasing it in over 12 months, citing limited state funding, prompting unions to demand full payment immediately and threaten renewed protests.

LIMS argued that the Treasury cannot sustainably accommodate the wage demands. The 2026 budget was already constrained. The sixfold increase in basic salaries was intended to be financed by higher gasoline taxes, import duties and VAT. Those measures, however, failed to generate sufficient revenue as the 2026 war depressed economic activity and government receipts while increasing spending on emergency relief, support for displaced people and debris management.

LIMS also warned that higher taxes and fees are placing further pressure on households and businesses. Higher fuel prices, import costs, transport expenses and electricity bills risk raising production costs, weakening economic activity and ultimately shrinking the tax base. Fuel taxation is particularly consequential because fuel is a major input into transport, private power generation and the production and distribution of goods. Tax increases, LIMS argued, cannot substitute for fiscal reform.

Other sources of financing are equally constrained. Lebanon remains in default on its Eurobonds and has little realistic access to conventional borrowing, while monetary financing by the central bank would risk reviving the cycle of currency depreciation. Fiscal discipline must therefore extend to the expenditure side. LIMS argued for reducing public employment substantially and using the resulting savings to improve compensation for a smaller, more productive workforce.

LIMS stressed that wage negotiations should be anchored in a transparent assessment of the Treasury’s capacity rather than political pressure. The 2027 budget should be based on credible fiscal data and realistic economic assumptions while advancing structural reforms. Sustained improvements in public-sector incomes ultimately depend not only on what the state can pay today, but on whether fiscal policy creates the conditions for investment, employment, productivity and private-sector growth needed to sustain higher real incomes over the long term.

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