Lebanon's Austerity Plan Aims to Cut Deficit to 7.6 Percent of GDP

Published May 21st, 2019 - 07:14 GMT
The series of Cabinet sessions on the budget have been accompanied by pressure exerted by public sector employees and military veterans.
The series of Cabinet sessions on the budget have been accompanied by pressure exerted by public sector employees and military veterans. (Shutterstock)
Highlights
The cuts came during the Cabinet’s 16th session on the budget.

Ministers said they had managed to cut the deficit to 7.6 percent of GDP in the draft 2019 state budget Monday, despite struggling to finalize the document.


The cuts came during the Cabinet’s 16th session on the budget, chaired by Prime Minister Saad Hariri, in which ministers sought to further slash public spending.

“Big progress was achieved at the Cabinet session today [Monday],” Hariri said at an Iftar after the session. “God willing, the budget will be adopted soon with all the cuts and all the strikes will be ended.”

He added that there was no justification for several ongoing strikes.

“We reduced spending and ministries’ expenditures,” Information Minister Jamal Jarrah announced after the session. “For example, the Public Works Ministry lowered its expenses,” Jarrah said.

He told reporters that the ministers will meet again Tuesday at noon for “a final session” on the budget talks at the Grand Serail.

“The numbers are fully clear now, along with the deficit ratio, the revenues and the expenses,” Jarrah said. He added that minor details in the budget were being hashed out before it was finalized.

The new deficit-to-GDP ratio was a drop from what Finance Minister Ali Hasan Khalil had announced early Monday.

Following an overnight Cabinet session, Khalil said in a tweet that as a result of the cuts that had been made, the 2019 state budget will reduce the deficit to 8.3 percent of the GDP.

Reducing the country’s deficit, estimated to have stood at 11 percent of the GDP in 2018, was a key aim set out at last year’s CEDRE conference, which sought to garner international support for Lebanon’s infrastructure and economy.

Local media reported that ministers had agreed on imposing a LL500,000 (around $330) fee for licenses to obtain tinted car windows, as well as increasing the postage stamp fees at the Foreign Ministry from LL1,000 to LL5,000.

Jarrah also said Cabinet is expected to make a decision Tuesday on the issue of cutting the salaries of MPs and ministers.

After the session ended, Foreign Minister Gebran Bassil told reporters that although the atmosphere was positive, ministers “needed more time in order to finalize the budget.”

Bassil’s remarks, however, drew the finance minister’s ire.

“Bassil’s comments defy logic and keep things tense,” Khalil was quoted by local media as saying after the session.

“We are responsible to the people and we are supposed to strengthen the Lebanese’s trust that the state can take decisions and not stretch things without an excuse,” Khalil later added in a tweet.

The series of Cabinet sessions on the budget have been accompanied by pressure exerted by public sector employees and military veterans, who have taken to the streets to protest proposed cuts to their wages and end-of-service benefits as part of the 2019 budget’s proposed austerity measures.

As ministers convened Monday, protesters - chiefly veterans - demonstrated at Nijmeh Square and attempted to break security barriers around the Grand Serail.

Their attempts led to confrontation with security forces, who responded by firing a water cannon, injuring at least one protester.

Defense Minister Elias Bou Saab, who met with a delegation of veterans as the protests were ongoing, assured them that their wages and benefits wouldn’t be cut.

Speaking from the Grand Serail, Bou Saab said the only article in the budget affecting veterans was a 3 percent cut to their pensions in order to support health care and social services. The measure also applies to the wages of active military personnel.

He added that he would hold discussions around eliminating the paperwork fees that military personnel pay to receive health care, as a way to compensate for the 3 percent pension cut.

Customs employees, who have also been on strike to oppose austerity measures in the draft budget, announced that they will suspend their strike Tuesday. The strike has led to the temporary suspension of fuel and gasoline deliveries to gas stations across the country. In response, people were seen rushing to gas stations to fill their cars as worries grew of nationwide gas shortages.

Once Cabinet finalizes talks on the 2019 draft budget, it is expected to meet again at Baabda Palace in a session chaired by President Michel Aoun for approval before it is referred to Parliament.

Speaking during an iftar event Sunday, Hariri said that he hoped the budget would be referred to Parliament this week for endorsement.


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