Lebanon's Cabinet has approved a new round of tax measures to fund public sector wage adjustments — a move that has exposed, with almost clinical precision, the country's broken compact between state and citizen. The average public employee, whose basic monthly salary stands at approximately $130 following six rounds of incremental raises, will now absorb the cost of those same raises through fresh levies on fuel and value-added goods. The wage increase, in other words, is being financed by the worker it purports to benefit.
In this region, today's headline is yesterday's history repeating. Lebanon has cycled through variants of this arrangement for decades: a state that expands its extractive capacity without expanding its productive or administrative competence. What is new in 2026 is the scale of the wreckage these measures must navigate.
The Lebanese pound collapsed in 2019, erasing more than 90 percent of its value against the dollar. The savings of an entire middle class evaporated. The 2020 Beirut port explosion killed more than 200 people and flattened an entire district of the capital. A banking sector that had, for years, financed state deficits through a Ponzi-like arrangement locked depositors out of their accounts. And through all of this, the Lebanese state continued to function primarily as a mechanism for distributing patronage among the country's seventeen formally recognized sects — what political scientists call the muhasasa ta'ifia, the system of confessional power-sharing that has governed the republic since independence from France in 1943.
The public sector itself is a product of that system. Ministries and public agencies are distributed among sects, their employees hired not primarily for competence but for factional affiliation. According to research from the Lebanese Center for Policy Studies, Lebanon's public sector payroll consumed approximately 35 percent of state revenues before the collapse — a figure rendered surreal by the near-total absence of public services those employees are meant to deliver.
Electricity is the most visible indictment. The state power utility, Electricite du Liban, supplies power for as few as one to three hours per day in some parts of the country. The gap has been filled by a network of private diesel generators — a parallel, entirely informal electricity market that costs Lebanese households an estimated $1.5 billion annually, according to estimates from the World Bank. Households and businesses pay both the state utility's bill and the generator operator's bill simultaneously, often for overlapping hours of supply. The inefficiency is not accidental; it is the system working as designed, channeling revenue toward connected operators rather than toward infrastructure.
Water follows the same logic. Lebanon's water infrastructure loses an estimated 40 to 50 percent of supply through aging pipes and inadequate maintenance, according to regional utility assessments. Public water authorities charge annual flat-rate fees disconnected from actual consumption, then fail to deliver consistent supply. Residents compensate by purchasing from private water trucks at premium rates.
It is against this backdrop that the Cabinet's new tax package must be understood. Lebanon has been engaged in formal negotiations with the International Monetary Fund since 2020, when a preliminary staff-level agreement on a $3 billion rescue package was announced. That agreement has remained unimplemented, suspended by the inability — or unwillingness — of Lebanon's political class to enact structural reforms, including a forensic audit of the central bank, a restructuring of the banking sector, and credible revenue-raising measures. The IMF's core demand has been consistent: demonstrate fiscal adjustment before the funds flow.
The new tax measures are being presented, in part, as a signal of that adjustment. But economists and civil society organizations tracking Lebanon's fiscal situation have noted the distinction between reform and extraction. Raising fuel duties and expanding VAT coverage generates revenue — but it does so regressively, falling heaviest on those least able to absorb it. The public sector employee earning $130 a month pays a proportionally higher share of income in fuel costs than a politically connected business owner whose imports pass through a different set of arrangements.
Sami Atallah, director of the Lebanese Center for Policy Studies, has argued in published commentary that Lebanon's fiscal predicament cannot be resolved without addressing the structural drain of public sector employment that is unmoored from service delivery. The political will to make that argument operationally does not exist in the current government. The Cabinet is itself a product of the confessional distribution system, its ministers beholden to factional leaders whose patronage networks depend on public employment.
What the new tax push reveals, then, is a state that has identified the path of least resistance: tax the already-strained rather than restructure the system that produces the strain. The $130 monthly salary number is not the beginning of the problem — it is its symptom. A public servant who earns so little that any new levy meaningfully erodes their purchasing power is a public servant whose employment was never primarily economic in purpose. They were hired as a political act, paid through a system that had no interest in efficiency, and are now being asked to subsidize the fiscal optics of a government negotiating with international creditors.
Lebanese civil society has not been passive. Trade unions and professional syndicates staged road-closures and work stoppages following the Cabinet announcement. The Syndicate of Public School Teachers has warned that classroom absences among educators, driven by the need to take second jobs, have reached levels that make any notion of functional public education theoretical. A nurse at a public hospital in Tripoli, speaking to Lebanese media last week, put it plainly: "I am paid by the state to care for patients. I cannot afford to come to work without the money I make cleaning houses on weekends. They want me to pay more taxes on my fuel. With which fuel?"
The international community has been direct in its assessments. The World Bank's 2021 Lebanon Economic Monitor, a document whose findings remain structurally valid, described Lebanon's economic collapse as among the top three most severe crises globally since the nineteenth century — and attributed it explicitly to elite capture of state institutions. That diagnosis has not changed. The tax package does not change it either. It is the sound of a system extracting from those it was never designed to serve.
For ordinary Lebanese — the nurse in Tripoli, the teacher in Beirut's southern suburbs, the civil servant whose six salary tranches amount to $130 — the question is no longer whether the social contract has broken down. It is whether one ever existed.
