No need for more talks over draft budget: Lebanon finance minister

Lebanese Finance Minister Ali Hassan Khalil attends a cabinet meeting at the government palace in Beirut, Lebanon, May 21, 2019. (Reuters)
Updated 21 May 2019
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No need for more talks over draft budget: Lebanon finance minister

  • Lebanon’s proposed austerity budget may please international lenders but it could enrage sectors of society
  • Lebanon has one of the world’s heaviest public debt burdens at 150 percent of GDP

BEIRUT: Lebanon’s finance minister said on Tuesday there was no need for more talks over the 2019 draft budget, seen as a vital test of the government’s will to reform, although the foreign minister signalled the debate may go on.
The cabinet says the budget will reduce the deficit to 7.6% of gross domestic product (GDP) from last year’s 11.2%. Lebanon has one of the world’s heaviest public debt burdens at 150% of GDP.
“There is no longer need for too much talking or anything that calls for delay. I have presented all the numbers in their final form,” Finance Minister Ali Hassan Khalil said.
But Foreign Minister Gebran Bassil suggested the debate may go on, telling reporters: “The budget is done when it’s done.”
While Lebanon has dragged its feet on reforms for years, its sectarian leaders appear more serious this time, warning of a catastrophe if there is no serious action. Their plans have triggered protests and strikes by state workers and army retirees worried about their pensions.
President Michel Aoun on Tuesday repeated his call for Lebanese to sacrifice “a little“: “(If) we want to hold onto all privileges without sacrifice, we will lose them all.”
“We import from abroad, we don’t produce anything ... So what we did was necessary and the citizens won’t realize its importance until after they feel its positive results soon,” Aoun said, noting Lebanon’s $80 billion debt mountain.
A draft of the budget seen by Reuters included a three-year freeze on all forms of hiring and a cap on bonus and overtime benefits.
It also includes a 2% levy on imports including refined oil products and excluding medicine and primary inputs for agriculture and industry, said Youssef Finianos, minister of public works and transport.
“DEVIL IN THE DETAIL“
Marwan Mikhael, head of research at Blominvest Bank, said investors would welcome the additional efforts in the latest draft to cut the deficit.
“There will be some who claim it is not good because they were hit by the decline in spending or increased taxes, but it should be well viewed by the international community,” he said.
Jason Tuvey, senior emerging markets economist at Capital Economics, said: “The numbers will be of some comfort to investors, but the devil will be in the detail.”
“Even if the authorities do manage to rein in the deficit, it probably won’t be enough to stabilize the debt ratio and some form of restructuring looks increasingly likely over the next couple of years,” Tuvey said.
The government said in January it was committed to paying all maturing debt and interest payments on the predetermined dates.
Lebanon’s main expenses are a bloated public sector, interest payments on public debt and transfers to the loss-making power generator, for which a reform plan was approved in April. The state is riddled with corruption and waste.
Serious reforms should help Lebanon tap into some $11 billion of project financing pledged at a Paris donors’ conference last year.
Once approved by cabinet, the draft budget must be debated and passed by parliament. While no specific timetable is in place for those steps, Aoun has previously said he wants the budget approved by parliament by the end of May.
On Monday, veterans fearing cuts to their pensions and benefits burned tires outside the parliament building where the cabinet met. Police used water cannon to drive them back.


Lebanon’s Hariri calls for cabinet solidarity in budget debate

Updated 18 June 2019
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Lebanon’s Hariri calls for cabinet solidarity in budget debate

  • The PM said cabinet ministers need to be united and responsible
  • Lebanon’s debt is almost 150% of its GDP

BEIRUT, June 18 : Lebanon Prime Minister Saad Al-Hariri on Tuesday called for parliament to quickly approve the country’s 2019 budget and urged his coalition government to avoid internal disputes.
The cabinet this month agreed a budget plan that shrinks the projected fiscal deficit by 4 percentage points from last year to 7.6% by cutting spending and raising taxes and other fees.
“What I want during the debate is for us to be responsible and united, and not contradictory,” Hariri said in a statement, addressing cabinet ministers as to their comportment during the parliament debate.
Parliament’s finance committee is debating the draft budget and has suggested amendments, local newspapers reported. It will then put the budget to the full assembly to ratify it.
Parliament is mostly composed of parties that are also present in the coalition government and which supported the budget there.
Since the budget was agreed there have been fierce arguments between parties in the coalition over several subjects, though these have not targeted the budget.
Lebanon has one of the world’s heaviest debt burdens, equivalent to about 150% of GDP, and the International Monetary Fund has urged it to cut spending.
“We have held 19 cabinet meetings to agree on this draft budget and these sessions were not for fun, but for deep, detailed debate over every clause and every idea,” Hariri said.
“For this reason, I consider it the responsibility of each of us in government to have ministerial solidarity...to defend in parliament the decision that we have taken together,” he added.
After the 2019 budget is agreed, the cabinet must quickly start working on the 2020 budget and on approving the first phase of a program of investments toward which foreign donors have offered $11 billion in project financing. (Reporting by Angus McDowall, editing by Ed Osmond)