Lebanese cabinet approves draft state budget

Finance Minister Ali Hassan said after a cabinet meeting in an interview with broadcaster NBN that all clauses had been agreed to. (Reuters)
Updated 24 May 2019
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Lebanese cabinet approves draft state budget

  • Budget is seen as a critical test of the government's determination to make changes
  • Could help unlock some $11 billion in financing

BEIRUT: The heavily indebted Lebanese government approved a draft budget to cut its large deficit on Friday, aiming to ward off a financial crisis which top leaders have warned is bearing down on the country unless it carries out reforms.
The draft 2019 budget, which will cut the deficit to 7.5% of GDP from 11.5% in 2018, is seen as a critical test of the government's will to launch reforms that have been put off for years by a state riddled with corruption and waste.
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 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.
"Now, praise God, we are done. The budget is complete," Information Minister Jamal Jarrah said after a cabinet session.
One more meeting to seal the process will be held at the presidential palace before the draft is referred to parliament for approval. Ministers did not say when the next session would take place.
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.
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 pension will also be taxed.
However a temporary public sector salary cut mooted by some early in the process was not included.
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 1% interest rate to the Lebanese banking sector.
The final cabinet approval had been obstructed by a dispute over whether more needed to be done to bring the deficit lower.
But Finance Minister Ali Hassan Khalil, speaking to local media, said "all the clauses and articles" had been agreed. Nobody had raised any objections when Prime Minister Saad al-Hariri said "we are done" at the end of the session, he added.
There was no immediate comment from Foreign Minister Gebran Bassil, who had been demanding further debate.
Deputy Prime Minister Ghassan Hasbani, speaking to Reuters on Thursday, said the draft budget would stabilise the financial situation and avoid "catastrophe" but it fell short of the major structural reforms Lebanon needs.
Economists in Lebanon say it will give a "positive shock" to market confidence against a backdrop of years of low economic growth, concern over a slowdown in the growth of bank deposits and falling central bank net foreign assets.
Aberdeen Standard Investments emerging markets fund manager Kevin Daly said: "We are still sceptical because they still have very little room in the budget." Wages and subsidies made up a large proportion of the deficit, he noted.
"I think the market will come back after the weekend and take a closer look ... the jury is still out on these guys".
Nassib Ghobril, chief economist at Lebanon's Byblos Bank, said the draft budget had stopped increases in government spending but had not reduced them.
"They might reduce the deficit to an acceptable level. But it is not a reform budget or an austerity budget, it is a budget based heavily on taxes," he said.
"This is the easy way out for the government to reduce the deficit. If we believe the figure, it is a significant reduction in the deficit, but it is not the way to do it in a stagnating economy, in an economy in need of liquidity."
Jason Tuvey, senior emerging markets economist at Capital Economics, said: "Markets might react positively initially in as far as they've actually managed to agree on a budget after several weeks of deliberations.
"But over longer horizon, we still think that markets in Lebanon will come under pressure again."


Prison becomes ‘second home’ for Turkish cartoonist

Updated 14 min 21 sec ago

Prison becomes ‘second home’ for Turkish cartoonist

  • Unfailingly optimistic and modest, Kart refuses to be run down by his ordeals

ISTANBUL: Renowned Turkish cartoonist Musa Kart says he has spent as much time in prison and courthouses as he has at work since President Recep Tayyip Erdogan came to power.

His latest stint in jail started in April, after an appeals court upheld his sentence of three years and nine months for “helping terrorist organizations.”

Released last week pending another appeal, Kart told AFP: “For 15 years, prisons and courthouses have become a second home to me.”

Kart, who was recognized last year by the Swiss Foundation Cartooning for Peace, was among 14 journalists and staff from the renowned opposition paper Cumhuriyet convicted in the case.

He was initially arrested in 2016 after Erdogan launched a major crackdown on opponents in the wake of a failed coup.

“I have spent almost the same amount of time in court corridors as I spent in the paper. It is very unfortunate,” he told AFP.

Unfailingly optimistic and modest, Kart refuses to be run down by his ordeals, and says he always made an effort to look his best for prison visitors.

“I never welcomed my visitors in a hopeless state,” he said. “I would shave, pick my cleanest shirt from my modest wardrobe and welcome them with open arms. We would spend our time telling jokes.” His morale was boosted by the knowledge he had done nothing wrong.

“If you believe that your position is right, if you have an inner peace about your past actions, then it is not that difficult to stand prison conditions,” he said. Kart has been in and out of trouble since Erdogan took power in 2003.

His first lawsuit came in 2005 over a cartoon portraying Erdogan, then prime minister, as a cat entangled in a ball of wool.

“I have drawn cartoons for over 40 years ... I did it in the past with other political leaders, but I was never the subject of a court case,” Kart said. 

“The frame of tolerance has seriously narrowed today.”

The current case against him claims he contacted members of the Gulen movement accused of orchestrating the failed coup in 2016. 

It also says the 14 Cumhuriyet staffers had conspired to change the paper’s editorial policy to support the Gulenists, as well as Kurdish rebels and the ultra-left Revolutionary People’s Liberation Party-Front.

“Today the accusations of terrorism have gone well beyond a realistic point,” Kart said.

“When you take a look at my cartoons, you see how much I am against any kind of terrorist organization and how seriously and strongly I criticize them.”

Rights advocates including the Reporters Without Borders have called on Turkey to revise its anti-terrorism and defamation laws, which they claim are abused to silence opponents.

Cumhuriyet — Turkey’s oldest daily founded in 1924 — is not owned by a business tycoon but by an independent foundation, making it an easier target for authorities.

The paper’s former editor-in-chief Can Dundar fled to Germany after being convicted in 2016 over an article alleging that Turkey had supplied weapons to Islamist groups in Syria.

It has its own internal problems, too — Kart and some of the others actually quit the paper last year over disagreements with the new management.

But the case has added to the chilling effect that has infected the whole of the media in Turkey, which has the highest number of imprisoned journalists in the world.

No date has been set for the next appeal, and Kart has no idea how the saga will end.

“Everyone knows that there has been a political shadow hanging over our case,” he said.

Whatever happens, he said his focus would remain on drawing.

“Cartoons are really a very strong language because you can find a way to express yourself under any circumstances, even under pressure.”