Lebanese PM: new budget start of “a long road” to economic safety

Saad Al-Hariri said the 2020 budget would not take as much time to create as the 2019 budget. (AFP/File)
Updated 26 May 2019
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Lebanese PM: new budget start of “a long road” to economic safety

  • Lebanese PM said the new budget is only the start of the changes for the country
  • Lebanon has one of the biggest debts in the world

BEIRUT: The Lebanese draft state budget for 2019 is the start of a “long road” and shows Lebanon is determined to tackle public sector waste, Prime Minister Saad Al-Hariri said, after his unity cabinet wrapped up marathon talks on the plan.
The budget finalized by the government on Friday cuts the deficit to 7.5% of GDP from 11.5% in 2018. It is seen as a critical test of Lebanon’s will to launch reforms that have been put off for years by a state riddled with corruption and waste.
“The 2019 budget is not the end. This budget is the beginning of a long road that we decided to take in order to lead the Lebanese economy to safety,” Hariri said in a speech at a Ramadan iftar meal on Saturday.
Lebanon’s bloated public sector is its biggest expense, followed by the cost of servicing a public debt equal to some 150% of GDP, one of the world’s heaviest debt burdens.
The government, which groups nearly all of Lebanon’s main political parties, met 19 times to agree on the budget. Hariri said the budget for 2020 would not take that much time “because now we know what we want to do.”
“The 2019 budget is the beginning of the process of what we want to do in 2020, 2021, 2022 and 2023,” he said, according to a transcript of his remarks sent by his office.
The cabinet is due to meet on Monday at the presidential palace to formally seal the process before the budget is referred to parliament.
The budget could help unlock some $11 billion in financing pledged at a Paris donors’ conference last year for infrastructure investment, if it wins the approval of donor countries and institutions.
Hariri said the budget was a message to the Lebanese, financial markets and friendly foreign states that Lebanon was determined to “address the weakness, imbalance and squander in the public sector.”
Measures to rein in the public sector wage bill include a three-year freeze in all types of state hiring and a cap on extra-salary bonuses. State pensions will also be taxed.
A big chunk of the deficit cut stems from tax increases including a 2% import tax and a hike in tax on interest payments.
The government also plans to cut some $660 million from the debt servicing bill by issuing treasury bonds at a 1% interest rate to the Lebanese banking sector.
Fears the budget would lead to cuts to state salaries, pensions or benefits triggered weeks of strikes and protests by public sector workers and military veterans.


Saudi Arabia relaxes ownership limits for foreign investors

Updated 26 June 2019
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Saudi Arabia relaxes ownership limits for foreign investors

  • Capital Market Authority chairman, Mohammed El Kuwaiz said, ownership in the Saudi capital market by financial investors had increased threefold this year
  • The move aims to help enhance the market’s efficiency and attractiveness and to expand the institutional investments base

RIYADH,: Saudi Arabia has relaxed a 49% limit for foreign strategic investors in shares of listed companies, aiming to attract billions of dollars of foreign funds as the Kingdom opens up the region’s largest bourse to a more diverse investor base.
The country has introduced a raft of reforms in recent years to make its stock market, the region’s biggest, attractive to foreign investors and issuers.
The move aims to help enhance the market’s efficiency and attractiveness and to expand the institutional investments base, the regulator, the Capital Market Authority (CMA), said in a statement on its website.
The Saudi stock market, which opened to foreign investors in 2015, has seen an upsurge in foreign fund flows since the start of the year due to its inclusion in the emerging markets indexes.
“In the beginning of this year, we had only one percent ownership in the Saudi capital market by financial investors, today it is over three percent, that’s more than a threefold increase,” CMA chairman, Mohammed El-Kuwaiz told Reuters in an interview.
“Our hope is that we can see a similar increase in terms of pace and magnitude as we start to create more avenues for foreign investors to come in to the market,” he added.
There will be no minimum or maximum ownership limit, although the owners must hold the shares for two years before they can sell.
Kuwaiz said huge demand from non-financial foreign investors pushed the CMA to grant approval on an exceptional basis to a number of strategic foreign investors to increase their holdings in Saudi listed companies. These included transactions at an insurance firm and a local bank.
Foreign investors have been net buyers of Saudi equities over the past few months, with purchases worth 51.2 billion riyals ($13.6 billion) until May 30. They currently own 6.6% of Saudi equities, of which 3.15% is owned by strategic foreign investors.
Local shares were incorporated into the FTSE emerging-market index in March and the MSCI emerging market benchmark in May this year. The country’s Tadawul All-Share Index is up 11 percent year-to-date.
Strategic foreign investors can take stakes in listed companies by buying shares directly on the market, or through private transactions and via initial public offerings.
Asked how this move would reflect on the Aramco IPO, planned for 2021, Kuwaiz said it would assure that the market has the physical regulatory and investor infrastructure to accommodate a company as large and as extensive as Saudi Aramco.