Ghaith warns of pay rises eaten up by prices
LIBYA – Former Central Bank of Libya board member Muraja Ghaith has said what matters in the unified salary scale is not a 10% or even 30% increase, but the Libyan dinar’s ability to let citizens live decently and improve their purchasing power.
Pay rises and demand for goods
In comments to the economic newspaper Sada, Ghaith said salary increases feed through into prices because, in his view, any rise in incomes lifts demand.
Purchasing power first
He argued that raising salaries without improving purchasing power is a vicious circle, as employees will demand another increase after a year or two because of higher prices.
The right solution, he said, is to strengthen the dinar’s purchasing power, warning that linking increases to the inflation rate could keep prices rising.
He gave the example that if inflation was 10% last year and 12% this year, tying pay rises to price growth makes wages chase inflation; if inflation does not rise, he argued, there is no need for a further increase, which would help preserve the dinar’s purchasing power.
