No New Taxes to Fix Lebanon's Economic Meltdown

Published September 19th, 2018 - 09:26 GMT
The country has the third-highest debt rate in the world compared with gross domestic product, currently standing at about $81 billion, or 152 percent of the country’s GDP. (Shutterstock)
The country has the third-highest debt rate in the world compared with gross domestic product, currently standing at about $81 billion, or 152 percent of the country’s GDP. (Shutterstock)

Caretaker Finance Minister Ali Hasan Khalil said Monday that no new taxes would be enacted in next year’s state budget, as parliamentarians grappled with fixing Lebanon’s finances amid looming deadlines and the country still without a fully empowered government. “There are no new taxes in the 2019 draft state budget and talks about new additions on gasoline aren’t at all on the table,” Khalil wrote in a tweet.

He appeared to be responding to a report in Al-Akhbar newspaper that said Central Bank Gov. Riad Salameh suggested in a meeting last week that to resolve the country’s housing loans crisis, LL5,000 ($3.33) should be added per every 20 liters of gasoline while the value-added tax also be increased. The housing loan crisis is just one of Lebanon’s economic and fiscal woes.

The country has the third-highest debt rate in the world compared with gross domestic product, currently standing at about $81 billion, or 152 percent of the country’s GDP.

Putting the country’s debt and economy on a sustainable path is a priority for both Lebanese politicians and international donors. In April, donors pledged $11 billion in loans and grants at the Paris CEDRE conference for infrastructure projects to boost the local economy, but the pledges can only be unlocked after economic forms are implemented.

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Those reforms hinge on the formation of Cabinet, a process now in its fourth month of deadlock.

Also stalled: the 2019 state budget, a draft of which the Finance Ministry has completed and sent to the Cabinet’s offices. In the meantime, Parliament’s Finance and Budget Committee is stepping up its work.

Several ministers will be called in for hearings in front of the committee after they failed to abide by reforms that had previously been agreed upon, committee Chair Ibrahim Kanaan said Monday.

He said these included a freeze on hiring any new employees as well as ensuring transparency in contracts.

“We in the Finance and Budget committee will not agree to any action that does not include commitment to the agreed-upon reforms,” Ibrahim said. His comments came after Khalil was heard by the committee on Lebanon’s current fiscal situation Monday morning.

Kanaan said Lebanon’s public spending needed to be streamlined and better organized to prevent the spending of seemingly “infinite” amounts of money. “If we can restructure spending, we can change a lot about the results expected at the end of the fiscal year,” he said.

“The most important thing is the commitment of political and parliamentary forces to the rule of law and institutions ... and [to] not regard ministries as independent states.”

He also said Khalil had confirmed no budget would be passed without accounting for previous years’ spending, a constitutional requirement that has been ignored for over a decade.

Kanaan quoted Khalil as saying that report had been completed.

In a series of tweets following the session, the finance minister said that the economic and financial situation he had presented showed that serious measures needed be taken to administer the state in a manner that sets out where the gaps are and what is needed to fix them.

Khalil said that to begin with, there should be “a serious political commitment to endorsing financial, economic and administrative policies.”


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