Lebanon 2019 state budget approved by cabinet

Lebanon's Prime Minister Saad Al-Hariri's cabinet had already agreed to the budget in principle on Friday. (Reuters/File Photo)
Updated 27 May 2019
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Lebanon 2019 state budget approved by cabinet

  • Budget is based on a growth forecast of 1.2 percent this year
  • Lebanon’s public debt burden, equivalent to about 150 percent of GDP, is one of the heaviest in the world

BEIRUT: The government of heavily indebted Lebanon formally approved a 2019 budget on Monday that includes deep spending cuts to narrow the projected deficit to 7.6 percent of gross domestic product (GDP) in a bid to stave off financial crisis.
The budget reflected “a real government will to take a corrective path” in state finances and is based on a growth forecast of 1.2 percent this year, Finance Minister Ali Hassan Khalil said in a news conference broadcast live on television.
It is seen as an important test of Lebanon’s will to enact reforms that could stabilize its debt trajectory in a state plagued by chronic corruption and waste. The cabinet had already agreed to the budget in principle on Friday, and it must still pass in parliament.
Lebanon’s public debt burden, equivalent to about 150 percent of GDP, is one of the heaviest in the world. Last year’s deficit was equal to about 11.5 percent of GDP, and economic growth rates have been weak for years.
Khalil said the budget had been well received by foreign states. Last year, international donors at the Paris Cedre conference pledged $11 billion in spending on Lebanese infrastructure in return for its government implementing reforms.
“This is a national need, reducing the deficit, before being linked to Cedre ... For sure there is a positive view from all those concerned abroad to what has been achieved on this level: the reform steps and the level of deficit reduction,” he said.
Khalil said that Lebanon now expected the new investment projects to start, and that the Finance Ministry’s efforts to keep the deficit in line with budget projections would show its seriousness.
This would result in the “injection and launching of new investment projects that will have a big impact on moving the economy,” he said.
Khalil said the government had taken steps, which he did not spell out, to bring down Lebanon’s huge trade deficit which he said was “putting pressure on the matter of the foreign currency reserve.”
He said those steps had stirred some “reservations” in government.
Cuts to benefits and pensions for state workers and the military led to protests and strikes as the coalition government spent weeks discussing the budget.
Lebanon’s public sector is its biggest expense, followed by the cost of servicing the public debt and subsidies to an inefficient electricity sector.
The budget includes a government plan to cut some $660 million from debt-servicing costs by issuing treasury bonds at a 1 percent interest rate to the Lebanese banking sector, Khalil has previously said.
Central Bank Governor Riad Salameh said on Monday the bank was “keen to follow up on current efforts with a focus on respect for Lebanese law and global financial rules that do not permit any obligatory measures on banks,” without elaborating.
Salameh said that measures to reform the budget and the power sector were “positive signs” and that financial markets and the Lebanese pound remained stable.
Approving the budget in parliament could take another month, Parliament Speaker Nabih Berri was quoted saying in local newspapers. Lebanon’s parliament is dominated by parties in the coalition.


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.