Lebanon finance minister says no need for more talks over draft budget

BEIRUT: Lebanon’s finance minister said on Tuesday there was no need for more delays or talks over the 2019 draft budget, seen as a vital test of the government’s will to reform, although the foreign minister signalled the debate may continue.

The cabinet says the budget will reduce the deficit to 7.6 per cent of GDP from last year’s 11.2 per cent. Lebanon has one of the world’s heaviest public debt burdens at 150 per cent of GDP.

A draft of the budget seen by Reuters confirmed measures to rein in the public sector wage and pension bill, including a three-year freeze on all forms of hiring and a cap on bonus and overtime benefits.

Marwan Mikhael, head of research at Blominvest Bank, said the latest draft showed extra efforts to bring down the deficit and it should be met with a good response by markets.

“There will be some who claim it is not good, because they were hit by the decline in spending or increased taxes, but it should be well viewed by the international community,” he said.

Revenue boosting measures include a 2 per cent levy on imports including refined oil products and excluding medicine and primary inputs for agriculture and industry, Youssef Finianos, the minister of public works and transport said.

Serious reforms should help Lebanon tap into some $11 billion (Dh40.40 billion) of project financing pledged at a Paris donors’ conference last year. The country has suffered from years of low growth.

Though Finance Minister Ali Hassan Khalil said the numbers had been presented “in their final form”, Foreign Minister Gebran Bassil suggested the debate may go on. “The budget is done when it’s done,” he told reporters.

Once approved by cabinet, the draft will go to parliament for debate and to be passed into law. While no specific timetable is in place for those steps, President Michel Aoun has previously said he wants the budget approved by parliament by the end of May.

Government attempts to impose what Prime Minister Saad al-Hariri says would be the most austere budget in its history have faced a string of protests and strikes by state workers and retired soldiers.

On Monday, veterans fearing cuts to their pensions and benefits burned tyres outside the parliament building where the cabinet met. Police used water cannon to drive them back.

The government forecasts include shaving some 1 trillion Lebanese pounds ($660 million) from debt servicing costs through issuing treasury bonds at an interest rate of 1 per cent in coordination with the banks, the finance minister told Reuters on Saturday.

The budget also hikes tax on interest to 10 per cent from 7 per cent for three years.

— Reuters