Lebanon’s government to discuss 2019 budget amidst $86 bln debt

Lebanese policymakers will meet today to resume discussions regarding the 2019 draft budget, which failed to reach consensus for several weeks amidst economic downturn and political tensions in the country.

Public debt stood at $86 billion in October 2018, and is held by local creditors, global banks, as well as international funds.

Lebanese Finance Minister Ali Hassan Khalil said in a Tweet on Tuesday that he didn’t see the need for more delay or talks over the 2019 budget draft, which the cabinet has repeatedly met to try and finalize.

“For me, the budget is done. There is no longer any reason to delay. I have submitted all of the figures in the final version,” he said.

The cabinet is faced with another challenge, posed by a series of protests organized the public and private sectors including retired military serviceman, Union Coordination Committee (UCC), Association of Public Administration Employees, and teachers unions.

It is expected that the new budget will cut costs on salaries of parliamentarians, ministers and senior officials, as well as other privileges. Meanwhile, the salaries of all protesting unions will remain intact.  

Sami Nader, an economist and Middle Eastern affairs analyst and Director of Levant Institute for Strategic Affairs (LISA) told Argaam that the Lebanese cabinet would end up approving the 2019 draft budget during today’s session.

However, Nader added that he is not “very optimistic” about the current situation because “real” reforms had not been tackled yet.

He expressed his concerns towards the fact that the level of total expenditures is still around 26 billion LBP, which constitute to be almost 34 percent of GDP, noting that this is “very alarming.”

Credit ratings agency Moody's estimated Lebanon’s public debt at 141 percent of GDP in 2018.

Nader further explained that this issue will be at the expense of the private sector growth and wealth, adding that “increasing taxes will only deepen the recession.”

The government has increased taxes from 10 to 11 percent last year 2018.

“In a nutshell, there were some improvements but the country requires a paradigm shift to ensure economic growth,” Nader concluded.

Nevertheless, the Lebanese banking sector has generated $22.1 billion of profits following the end of the civil war from 1993 until 2018.

Meanwhile, Lebanon has vowed to cut public spending in order to meet aid exceeding $11 billion pledged by international donors for an investment program to boost its economy during the Cedar (CEDRE) Conference held in April 2018 in Paris.

Saudi Arabia, a long-time ally of Lebanon, has pledged on several occasions its readiness to support the country’s economy recovery.

Read here: Saudi Arabia ready to support Lebanon's economy: Al-Jaadan

The Kingdom, however, has halted back in 2016 a $4 billion aid package to the Lebanese army and internal security service in response to the government failure to condemn attacks on the Saudi embassy in Tehran.

Write to Christine at christine.elcheikh@argaamplus.com