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Government Raises Wages as Prices Rocket

(08-May-08)
By IWPR
Economists are torn over whether the Syrian government’s decision to increase public sector salaries by 25 per cent will be cancelled out by soaring fuel prices, which jumped shortly after the raises were announced.



Finance Minister Mohammad al-Hussein told the state-run SANA news agency on May 3 that the government was allocating 58 billion Syrian lira, just over one billion US dollars, for the pay rises, which will benefit more than two million employees as well as retired public sector and military employeees. The private sector will be unaffected.



The government also said it was raising the legal minimum wage, which also applies to the private sector, from 5,000 to 6,250 lira a month, or from 100 to 125 dollars.



The raises were intended to offset rising food and oil costs, which have hit Syrians’ pockets. The price of crude is hovering around 120 dollars a barrel, and the government recently cut subsidies on heating oil and fuel.



However, as soon as the pay rises were made public, petrol prices jumped from 145 to 250 lira (2.90 to five dollars) a litre. Subsidised fuel oil – available only in a set quota for each household under a recent change to the rules – now costs nine rather than seven lira (18 instead of 14 cents), while on the open market it is selling for about 25 lira a litre.



Bus fares in and around Damascus were increased from five to eight lira on May 4.



Rateb al-Shallah, head of the Federation of Chambers of Commerce, told SANA that the pay rises would improve the standard of living of people on low incomes and would offset the rising prices.



“The salaries came just in time,” he said.



Deputy trade and economy minister Ghassan Eid agreed, telling SANA that the raises “will close the gap between prices and wages”.



Government economists said the increased purchasing power created by higher salaries was expected to jump-start stagnating businesses and markets.



Others, however, questioned whether the pay hikes would counter inflation.



“The raises defused people’s anger, which grew when the prices of kerosene [fuel oil] and other goods and services increased,” said one Damascus-based economist who asked not to be named. “But we shouldn’t forget that the raises themselves will inevitably cause prices to increase. That’s already happened.



"We can expect more inflation [and] a further decline in purchasing power."



A secondary school teacher in the state sector in Damascus said, “The recent raise is very good for those who are single or don't have a big family – it can cover most of their basic needs. But I have four kids, we rent our house, and my husband is a teacher as well. Even with the raise, we can’t cover our costs right now unless we [also] teach privately.”



“Rising prices are swallowing up the raises,” she added.



The inflation level was 14 per cent last year, as government economic expert Ehab Ismandar told al-Hayat newspaper.



Bloggers and online articles have been critical of the government’s handling of the inflationary environment, which has been exacerbated by the decision to curtail subsidies on oil products.



(Syria News Briefing, a weekly news analysis service, draws on information and opinion from a network of IWPR-trained Syrian journalists based in the country.)

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