Finance Minister Mohammad Safadi will ask the Cabinet for $350 million to cover the salary increases of government employees this year.
Safadi said the requested funds would only cover the cost of wage hikes retroactively from Feb.1, 2012, and state workers would receive a second installment on their salary increases next year.
“The bottom line is that the increases in the salary scale will be paid in installments over a two-year period,” Safadi said.
The minister said the advance payment would be financed by issuing treasury bills, a move that would increase the budget deficit.
Safadi added that the $350-million cash injection would help stimulate the economy and activate markets.
He estimated that the salary increases would cost the treasury $1.2 billion a year, causing the deficit to swell unless the government comes up with a strategy to boost revenues.
However, Prime Minister Najib Mikati is reluctant to introduce any substantial tax increases during his term as any such move would likely spark protests by labor unions and the private sector.
Nearly 200,000 civil servants, Army and security personnel as well as retired government employees are entitled to the salary increase.
Private sector employees already received a salary hike as of February this year.
Safadi also said a new salary scale would come into force in 2014.
“This [new salary] scale depends on finding a suitable job description for state employees, so that any increment would be determined by the job title and productivity of the employee,” the minister explained.
However, Economy and Trade Minister Nicolas Nahhas suggested that the government was reluctant to pass the salary scale at this stage because such a move would negatively impact the economy and the state’s budget.
Public school teachers and many government employees staged sit-ins and strikes two months ago to press the Cabinet to adopt the salary scale.
The Union Coordination Committee, which groups public school teachers and public sector employees, has threatened escalatory measures including an open strike if the government refuses to pass the salary scale before the end of 2012.
Successive governments since 1996 have dodged the issue of the salary scale, fearing this would involve the allocation of huge amounts of money.
Safadi also said the 2013 draft budget had been hammered out and the bill would call for the same tax proposals mentioned in the 2012 budget.
But sources said they did not expect any new taxes to be approved at this stage, adding that the 2013 draft budget would be shelved if such measures were included.
They said the Cabinet could, however, consider taxes that would not risk drawing an angry response from labor unions or the private sector.
One of the options which Mikati may push for in upcoming Cabinet meetings is the participation of the private sector in major infrastructure projects such as electricity and water.
Lebanese banks, which are flush with cash and eyeing potential investments, have expressed readiness to invest part of their massive assets into government infrastructure.