--- title: "How Can the Adjustment of Salaries and Wages Be Extricated from Its Vicious Circle? | Ghazi Mahmoud" url: https://ghazimahmoud.com/en/articles/2026-04-29-79b6ac/ lang: en description: "The issue of adjusting salaries and wages in Lebanon is trapped in a vicious circle because the government links any increase in public expenditure required for such an adjustment to an increase in revenues, an increase that, according to the government, is possible only by raising indirect taxes, particularly levies on gasoline and other items." --- [All articles](https://ghazimahmoud.com/en/articles/) # How Can the Adjustment of Salaries and Wages Be Extricated from Its Vicious Circle? [Brig. Gen. (Ret.) Dr. Ghazi Mahmoud](https://ghazimahmoud.com/en/about/) 29 Apr 2026 · 9 min read [The Lebanese economy](https://ghazimahmoud.com/en/articles/leb/) The issue of adjusting salaries and wages in Lebanon is trapped in a vicious circle because the government links any increase in public expenditure required for such an adjustment to an increase in revenues, an increase that, according to the government, is possible only by raising indirect taxes, particularly levies on gasoline and other items. On the one hand, this leads to a fresh rise in the prices of goods and services, and on the other, it erodes the value of the raise even before public sector employees and retirees collect it. At its session held on Monday, February 16, 2026, the Lebanese Cabinet approved granting public sector employees across all cadres, along with contracted staff and retirees, a raise equivalent to six additional salaries, including full supplementary allowances for military personnel. In return, it decided to impose a tax of 300,000 Lebanese pounds per canister of gasoline, raise the value-added tax by 1%, and increase fees on shipping containers. This sparked a wave of objections across a broad spectrum of politicians, commentators, and ordinary citizens, and failed to win acceptance from public sector employees and retirees, whether military or civilian. This was not the first time the government had moved to impose levies on gasoline canisters. It had previously approved them at a session on May 19, 2025, before the State Shura Council issued a decision suspending their implementation on July 16, 2025, following appeals filed before it. At the time, that ruling was regarded as an important legal development halting what was described as an additional burden on citizens amid difficult conditions. Just as the Ministry of Finance, and behind it the Lebanese government as a whole, ought not embark on arbitrary increases in salaries and wages, it is equally obliged not to rely on the easiest source of financing for this raise, namely imposing a levy on each canister of gasoline by taking advantage of the legislative delegation in customs matters contained in Article 55 of the 2026 Budget Law. As for the decision to add 1% to the value-added tax, it requires a law passed by Parliament. Attention should also be drawn to the expected inflationary impact of these measures. Raising the cost of fuel feeds directly into the prices of transport, goods, and services, eroding part of the raise granted and reproducing the very same vicious circle between rising salaries and rising prices, without providing a fundamental remedy either to adjust salaries on the one hand or to curb price increases for goods and services on the other. Faced with this floundering in handling the salary adjustment crisis, a series of questions must be raised as to why no initiative has been taken to draw up a fair and equitable plan to adjust the salaries and wages of public sector employees while simultaneously taking the state of public finances into account, given the following considerations: Adjusting salaries is a chronic crisis: Adjusting the salaries and wages of public sector employees and retirees is not a recent issue. Rather, it is as old as the crisis itself, constituting both one of its direct consequences and a telling indicator of its persistence and complexity. Accordingly, any postponement in addressing this file within a comprehensive reform framework will prolong the crisis and aggravate its economic and social repercussions. Nothing new in the approach to solutions: The current government's approach has not differed from that of its predecessors in relying on higher indirect taxes and fees, which affect all social strata without real differentiation among income levels, as the primary source of financing for the proposed increase, without bringing about any fundamental shift in the philosophy or instruments of policy. This raises serious concerns regarding tax justice and the adverse social impact of these measures. Discussions inside the Cabinet revealed that the Ministry of Finance failed to abide by its obligation to provide ministers with the study detailing the cost of the proposed increase and the mechanisms for its distribution, as these figures were not circulated 48 hours prior to the session so as to enable ministers to review and debate them properly. The government's recent decisions approving salary and wage increases for public sector employees, contractors, and retirees raise a host of concerns. First: The high salaries approved by the government for regulatory authorities reflect a clear distortion in standards of fairness among job categories within the public sector, raising legitimate questions about the grounds on which those increases were based. Justifying them under the pretext of attracting qualified talent appears neither sufficient nor convincing, particularly given the advisory, non-binding nature of these bodies' decisions vis-a-vis their supervisory authority. Second: The government's approval of a monthly allowance paid to owners and drivers of gasoline-powered public passenger vehicles, in addition to fuel vouchers, reflects clear arbitrariness in allocating public resources to whomever the authorities choose to subsidize, and exposes a populist streak lacking responsibility and a reformist vision. Protecting this sector lies in regulating it and enforcing the regulations in force, particularly by restricting the driving of public passenger vehicles to Lebanese nationals in accordance with established legal frameworks, alongside other measures. Third: Negotiating with the International Monetary Fund as a gateway to restoring the international community's confidence in the Lebanese economy and its institutions does not justify automatically adopting its recommendations or conditions. Experience shows that some of its programs implemented in several countries have contributed to deepening economic and social imbalances, which calls for an approach that balances the requirements of reform with the protection of social stability. What further complicates the salary and wage adjustment crisis is the need to pair it with a comprehensive economic vision that serves as the indispensable pathway to revival and recovery, concurrently with plans to combat tax evasion on the one hand and simplify methods for settling dues on the other, in addition to the imperative of restructuring public administration and carrying out administrative reform that restores its effectiveness. This underscores the need for the following: An integrated economic vision: The government must formulate a comprehensive, integrated economic vision grounded in clear, measurable objectives distributed across a phased timetable that ensures sequential and coordinated implementation. The absence of such a vision constitutes a structural flaw that impedes the attainment of desired outcomes and weakens the effectiveness of public policies in achieving the sought-after economic revival. Combating tax evasion: Combating tax evasion must go hand in hand with developing mechanisms for collecting fees and taxes so as to enhance transparency and efficiency. This requires simplifying and facilitating payment methods and modernizing collection systems, in parallel with tighter oversight and the activation of accountability tools against defaulters, thereby entrenching tax compliance and strengthening the fairness of the fiscal system. Administrative reform: Any serious handling of the salary file requires linking it to administrative reform that raises public sector productivity and restructures institutions suffering from overstaffing or overlapping mandates, turning wage adjustment from a financial burden into an investment in administrative efficiency and the quality of public services. Unattainability of desired growth: Such growth remains out of reach so long as the incomes of a vital segment of society are insufficient to cover minimum living expenses. The imbalance between incomes and the cost of living does not affect individuals alone; it also weighs negatively on macroeconomic dynamics, undermines the effectiveness of development policies, and weakens the prospects for implementing growth plans and achieving their goals. Extricating salary and wage adjustments from the vicious circle in which every salary increase triggers a rise in the prices of goods and services requires a number of measures, among them: Indexing increases to the cost-of-living index: Adopting an automatic salary adjustment mechanism linked to a published, accurate inflation index issued by an independent statistical body, so as to prevent wage erosion caused by political delays, insulate the salary file from opportunistic political wrangling, and transform adjustment from an exceptional decision into a stable institutional mechanism. Stimulating growth as a prerequisite for sustainable adjustment: The salary question cannot be separated from the trajectory of economic growth. The higher productivity rises and the broader the economic base expands, the less need there is to finance raises through inflationary taxes. Stimulating productive sectors (industry, agriculture, technology, and the digital economy) therefore forms a cornerstone for breaking the vicious circle over the medium term. Modernizing the tax system: There is a need for a comprehensive overhaul and modernization of the tax system, particularly with regard to adopting the principle of progressive taxation on high profits and incomes, so that each individual bears a tax burden commensurate with his or her level of income and wealth, rather than placing low-income and socially most vulnerable groups on an equal footing with the wealthy and business owners. Accelerating the collection of outstanding fees: It is imperative to speed up the collection of unpaid fees, especially on maritime public property, estimated at between $250 million and $500 million, as they amount to half the value of the approved raise, alongside other outstanding dues, particularly since any delay in collection constitutes fiscal waste with direct repercussions for public financial balances and sustainable financing capacity. Securing sustainable resources: Sustainable resources are not limited to searching for new sources of revenue; rather, they require stimulating growth, expanding the productive capacities of the national economy, and reconsidering how the state manages its public assets and properties by establishing sound governance. They also require broadening the tax base, ensuring fairness in the distribution of burdens, and curbing social disparities. Based on the foregoing, it can be said that the vicious circle in which salaries and prices revolve is not an inescapable fate, but rather the result of a lack of coordination between economic objectives and fiscal policies on the one hand, and the role required of the public sector and its military and security agencies on the other. Breaking this circle demands a synchronized approach that neither adjusts wages in isolation from productivity and growth nor addresses the money supply in isolation from the requirements of economic activity. Conversely, it must be emphasized that adjusting salaries and wages is a legitimate right of public sector employees and retirees, yet enshrining it fairly and sustainably requires abandoning the logic of ad hoc fixes and adopting the logic of structural reform. At issue is not merely adding figures to payroll schedules, so much as rebuilding trust between the state and its citizens through a fair fiscal policy, sound resource management, and a clearly defined economic vision. Without that, fiscal decisions will remain trapped in a vicious circle between street pressure, budget pressure, and eroding purchasing power, while economic revival remains deferred. Translated from Arabic with AI. [Read it in Arabic](https://ghazimahmoud.com/articles/2026-04-29-79b6ac/) ## Published in - [Lebanese Army Magazine](https://www.lebarmy.gov.lb/ar/content/كيف-يمكن-إخراج-تصحيح-الرواتب-والأجور-من-الحلقة-المفرغة؟) ## More on the Lebanese economy [All articles on this subject](https://ghazimahmoud.com/en/articles/leb/) [22 Apr 2026 · The Lebanese Economy Between Accumulating Crises and the Repercussions of Regional Wars · Anbaa Online, Channel 23 ](https://ghazimahmoud.com/en/articles/2026-04-22-0f3db7/) [15 Apr 2026 · From Economic Growth to Sustainable Development: A Comparative Study · Al-Duha magazine ](https://ghazimahmoud.com/en/articles/2026-04-15-067ab6/) [9 Apr 2026 · Energy Prices Worsen Living Standards in Lebanon · Channel 23, MTV Lebanon ](https://ghazimahmoud.com/en/articles/2026-04-09-2ccc3f/)