Lebanon/Bloomberg

Economy

Lebanese cabinet approves 2019 budget with emphasis on austerity

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The Lebanese finance minister said that the budget sets a deficit target of 7.6 per cent of gross domestic product (GDP) for 2019, down from the current 11.4 per cent.

Tuesday 28, May 2019

(Bloomberg) --Lebanon’s government passed its 2019 draft budget after months of delays, the latest effort to get the nation’s fiscal house in order and threatening to unleash public anger over cutbacks.

The proposals must now be passed by parliament, where they might face stiff opposition from lawmakers alarmed at growing public anger over having to foot the bill for decades of mismanagement of government finances.

Ali Hassan Khalil, the Lebanese Finance Minister, said, “We can maintain this number and we can improve it, we are serious in this and it will be translated through an injection of new investment projects that will revive the economy.”

At stake is $11 billion in funding pledged by international donors who are waiting for evidence that Lebanon is committed to reducing the deficit and combating corruption.

Prime Minister Saad Hariri’s government had sought to cut nearly LBP 1.2 trillion ($800 million) in spending to stabilise public finances.

The International Monetary Fund (IMF) said that Lebanon’s public debt, estimated at over 160 per cent of GDP this year, is projected to rise to near 180 per cent by 2023 second only to Japan.

While the budget doesn’t feature cuts to public-sector salaries, the government amended what it deemed to be exaggerated benefits of some public employees, Khalil said.

Total expenditure in 2019 is projected at LBP 23 trillion, with revenues at LBP 19 trillion and doesn’t include LBP 2.5 trillion for the state-run electricity company.

Lebanese cabinet ministers approved a series of measures to increase revenue, including raising tax on interest on deposits to 10 per cent from seven per cent over the objections of local lenders.

Additionally, they increased income tax for high earners and hiked fines on tax evaders as well as work permits. The cabinet also cut ministerial budgets, state contributions to organisations and health-care benefits for public-sector employees.

Lebanon has committed to lowering its deficit, as well as reining in its ballooning debt and tackling rampant corruption in return for the billions in pledged donor money. The World Bank along and other countries offered the money to help Lebanon fund its infrastructure programme to boost growth, generate jobs and attract foreign investment.

TAGS : Lebanon 2019 budget, budget deficit, Foreign aid, austerity measures

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