Lebanon plans first budget since 2005

Sunday 24/07/2016
Country is burdened by $71 billion in public debt

BEIRUT - Lebanon’s cabinet unani­mously decided that it was “necessary” to draft a state budget for the first time since 2005 but the fiscal plan may face delays as long-standing political divisions remain as hard to tackle as ever.
The Council of Ministers’ meet­ing discussed a report on the coun­try’s deteriorating fiscal situation presented by Finance Minister Ali Hassan Khalil. The country is bur­dened by $71 billion in public debt and an annual $4 billion budget deficit. Its gross domestic product is estimated at $44.35 billion and its annual growth at 1-1.5% in recent years.
“The ministers agreed unani­mously that something should be done but they kept this… some­thing for further discussions,” a cabinet source said. “Khalil’s report is definitely worrying and all minis­ters seemed truly worried.
“However, we all know that budgets were prepared almost eve­ry year since 2005 but were never passed due to conditions imposed by conflicting political parties.”
In his 41-page report, Khalil warned of the repercussions of the worsening political crisis — namely the presidential vacuum — on the financial situation and the risks posed by random spending in the absence of a state budget. Uncon­trolled spending, which has drawn warnings from the World Bank, the International Monetary Fund and others, wastes public funds and threatens disruptions in vital spending, the minister wrote.
Among other things, Khalil pro­posed imposing taxes to increase revenues and avoid further deterio­ration of the struggling economy. He backed proposals to increase salaries of public sector employees and insisted that the budget should be finalised according to the con­stitution — by the cabinet by Sep­tember and by parliament by De­cember. A source close to him said he would pressure the cabinet to is­sue the budget in a special decree if parliament takes too much time to approve it.
An early sign to the thorniness of the matter came immediately after a July 12th cabinet meeting. Khalil has been locked in a war of words with former prime minister Fouad Siniora over alleged corruption and bribery at the Finance Ministry as well as mismanagement of public funds.
The Future Movement’s parlia­mentary bloc, led by Siniora, criti­cised the Finance Ministry for fail­ing to control spending and curb corruption and bribery. The bloc’s statement drew a quick response from Khalil, a member of Speaker Nabih Berri’s bloc, who rejected ac­cusations of corruption and bribery at his ministry.
A key hurdle to passing state budgets since 2005 has been calls by critics of Siniora for a review of government expenditures since 1992. The critics, led by the Reform and Change bloc of Christian leader Michel Aoun, say Siniora was re­sponsible for illegal spending, lead­ing to mushrooming public debt.
“Since it reached parliament in 2005, the bloc hurdled the approval of budgets by imposing a precondi­tion: auditing former budgets,” the source said.
However, the bloc’s leading party, the Free Patriotic Movement, hint­ed that compromise was possible. “Some of Minister Khalil’s propos­als are feasible and can be subject to political consensus,” said Foreign Minister Gebran Bassil, president of the movement and son-in-law of Aoun, its founder and honorary leader.
The Future Movement welcomed the cabinet’s July 18th decision and urged for the election of a president by parliament and a revitalisation of all constitutional institutions. Lebanon has been without a presi­dent since May 2014 as political bickering has prevented parliament from reaching the necessary quo­rum.
The parliament has twice extend­ed its tenure into a full 4-year term, expiring in 2017. The legislature is not meeting except randomly as many political parties stick to a constitutional article giving priority to the election of a president.
Economist Jassem Ajaka urged for a reformative budget. “It is dif­ficult to talk about temporary remedies. The fiscal situation has crossed the red line,” he said. “The absence of budgets is responsible for many fiscal and financial ills, mainly the hike of public debts from $38 billion in 2005 to $71 bil­lion now.”
If the request for auditing state fi­nances between 1992 and 2005 was dropped or a compromise reached, another hurdle on the budget looms. Some ministers want Leba­non’s contribution to an interna­tional court looking into Rafik Hari­ri’s 2005 assassination included in the budget, another cabinet source said.
The court is trying five leading Hezbollah members in absentia for planning and perpetrating the at­tack killing Hariri and 21 others. Hezbollah ministers and lawmakers have hurdled Lebanon’s settlement of its annual fees to the cabinet, forcing prime ministers to make the payment from a special fund under their disposal.
“It is unclear if the call for includ­ing the payment in the budget is se­rious or just a manoeuvre to make callers for auditing government accounts since 1992 drop their call. Let us wait and see if a budget does get through,” the second source said.