Spotlight: Salary cut in public sector to cause economic disaster in Lebanon: economists

Source: Xinhua| 2019-04-21 03:29:35|Editor: Mu Xuequan
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by Dana Halawi

BEIRUT, April 20 (Xinhua) -- Lebanese economists agreed that reducing salaries of public sector employees will lead to economic disaster in the country.

"The government's plan to cut salaries of public sector employees will cause the disappearance of the middle class in Lebanon," Layal Mansour, a researcher at the American University of Beirut, told Xinhua.

Mansour explained that the 2 million Lebanese pounds (1,327 U.S. dollars) paid to a public sector employee do not have the same purchasing power of euros spent in Europe.

"Most of the spending by Lebanese people is focused on necessities that should be provided by the government in the first place, such as electricity, hospitalization, water and education," she said.

The decrease in public sector wages will reduce people's consumption, thus leading to the closure of businesses and the lay-off of thousands of employees and causing social insecurity, the Lebanese researcher noted.

"Moreover, people will not be able to pay for their bank loans which will result in an increase in default rate on banks loans, prompting banks to impose higher interest rates on loans," Mansour added.

Lebanese officials have, on many occasions, hinted about their plan to cut wages of employees in the public sector in a bid to reduce the budget deficit to fewer than nine percent of GDP from 11.2 percent in 2018.

Last week, Lebanese Foreign Minister Gebran Bassil said unpopular measures will be taken in a bid to reduce the 2019 state budget.

"If we do not reduce salaries, there will be no salaries, no economy nor Lebanese pound," Bassil said.

His remarks prompted public sector employees, including teachers, municipalities' employees and other state workers, to hold strikes against such measures.

Meanwhile, Finance Minister Ali Hassan Khalil said in a televised interview that the government must take urgent reforms in a bid to save the country from bankruptcy.

Khalil said the draft budget he prepared will include salaries cut for high-income employees without specifying the brackets of salaries that will witness reduction.

"Some of the public sector employees are paid 50 million Lebanese pounds which is higher than the salary of the president of the republic," he said.

Pierre Khoury, a Lebanese economist, said the government should not cut salaries for those paid fewer than 15 million Lebanese pounds because this will create great pressure on the middle class in Lebanon.

If the government attempts to cut salaries of people who have lower wages, it will cause a big social problem, leading to the shut-down of supermarkets, restaurants and coffee shops, he warned.

According to Khoury, the government should lay off nonproductive people or at least hold public employees accountable in a way that would turn the public sector into a productive one.

"Public sector people are not productive because they feel secure and they can stay forever in their jobs even if they do not assume their responsibilities," he explained.

Nassib Ghobril, an economist and the head of the economic research department at Byblos Bank, said another way of reducing government expenditure is stopping recruitment in the public sector.

Lebanon's government employment rate is the highest in the world, with 35 percent of public budget used to pay salaries, wages, and social benefits.