Beirut: In a major development, Prime Minister Sa’ad Hariri secured a cabinet approval for the 2017 state budget, the country’s first since 2005. According to the Minister of Information, Melhem Riachi, the draft included a deficit, which was not revealed before the proposal reached parliament for final discussion and ratification.
While Riachi asserted that “the deficit was greatly decreased,” a previous draft leaked to media outlets forecast a $5.2 billion (Dh19.1 billion) shortfall, or a little less that 10 per cent of gross domestic product.
Riachi further revealed that the Minister of Finance, Ali Hassan Khalil, will hold a press conference to announce all of the details, provide actual numbers including the projected deficit, along with, expected revenues after President Michel Aoun and Prime Minister Hariri return from the Arab Summit in Jordan.
The Lebanese economy recorded significant losses in recent years, largely attributed to the ongoing wars in Syria, which frightened away Gulf Cooperation Council (GCC) investors. GCC governments banned their nationals from travelling to Lebanon, which meant that the country lost hundreds of thousands of visitors, most of whom where generous spenders that lubricated the economy.
Notwithstanding political spin, cabinet members bickered over every item, as differences between rival groups emerged. On Tuesday, the Minister of Foreign Affairs, Jibran Bassil affirmed that “new elements to promote tax justice and abolish protected monopolies were introduced” in the new budget although few understood what that actually meant.
He told his Free Patriotic Movement bloc that three of his demands, including tax on real estate profits, bank revenues, and on individual financial interest gains, were approved. He claimed that no new taxes will affect the poor although this too was unclear without concrete numbers.
Lebanese officials struggled to produce this draft budget, which falls short of addressing sorely needed structural reforms to limit corruption, especially with respect to the ballooning electricity bill. The latter swallows between $ 1.5 and 2 billion year-in and year-out, without providing the energy required, which obligates consumers to subscribe to private suppliers as well.
Lebanese politicians relied on ad hoc spending since 2005 without any oversight that, in the words of the London-based Economist, “often benefit[ed] special interests within the government’s various factions rather than paying for public-infrastructure investment.”
Consequently, Lebanon accumulated huge debts, which topped the $75 billion figure in 2016. The government is now hoping that the election of a new head-of-state in October 2016, along with a new budget, will ease the political deadlock, encourage GCC investments and tourism to return and, if possible, to receive Arab League backing to alleviate the burden of nearly 2 million Syrian refugees.
Parliament was expected to examine the proposed budget and resolve disputes over tax provisions — 8 out of 22 items were already passed — though it is unclear whether the legislative branch will authorise Lebanon to regain control over state finances. Such a move might encourage rival political factions to lay the groundwork for the next hurdle—the adoption of a new electoral law—ahead of the Spring 2017 parliamentary elections.
