The Cabinet might meet in a special session next week to begin discussing the 2019 draft state budget, which includes reductions in state spending, Finance Minister Ali Hasan Khalil said Thursday night.
Speaking in an interview with MTV, Khalil disclosed astronomical salaries paid to some civil servants, blamed in part for the budget deficit.
“I have completely finalized the draft budget after amendments were introduced to its figures,” Khalil said. He added that he spoke by telephone with Prime Minister Saad Hariri Thursday before the premier left for Riyadh on “a short family visit” and agreed with him to convene a Cabinet session next Tuesday to be devoted to discussing the draft budget. He said the Cabinet session would be held if President Michel Aoun agreed to it.
“I will officially present the draft budget to the Cabinet along with the amendments to begin discussing it at length before sending it to Parliament,” Khalil said.
Earlier in the day, Khalil said Lebanon was preparing to issue $2.5-3 billion in Eurobonds on May 20, in the government’s latest pitch to finance the public debt and meet its needs. Speaking to Reuters, Khalil did not disclose any further details about the new Eurobonds issue. The interest rates and maturity of these bonds are yet to be decided.
Throughout the interview with MTV, Khalil stressed that reforms were more urgent than at any time before to rescue the ailing economy. He said the draft budget, which includes fiscal and economic reforms recommended at last year’s CEDRE conference, would not touch the salaries and wages of limited and medium income people, or the 2017 salary hikes to civil servants and government schoolteachers.
Declaring that previous budgets did not reflect the true figures, Khalil said: “The budget I will present [to Cabinet] must be a transparent one … The country’s economic and financial policy must be re-evaluated.”
He said 35 percent of the budget goes to paying civil servants’ salaries and social benefits, 35 percent to service the public debt, 11 percent to subsidize the state-run Electricite du Liban, and the remaining 19 percent goes for spending on investment projects and running state affairs.
Khalil said it was illogical that thousands of civil servants were getting higher salaries than the president of the republic. “There are people who get between 20 to 30 million pounds a month. We must put a ceiling to these salaries,” he said.
He added that some director generals and senior officials get salaries of between 35 to 50 million pounds. “We are working so that all institutions that benefit from public funds must be subject to the audit department of the Finance Ministry,” Khalil said, adding that there are civil servants who get two salaries a month.
He cited the example of MPs, who are also retired army generals, who get the salaries of lawmakers and retired military personnel. “This law is illogical and must be changed,” he said.
Khalil’s remarks come as Hariri is striving to secure political consensus over austerity measures the government plans to adopt in the 2019 budget in order to reduce the deficit.
Hariri has been meeting with ministers and officials from various blocs in a bid to agree on the “difficult measures” the Cabinet needs to take to generate revenues, cut the budget deficit and bolster the flagging economy, reeling under $85 billion in public debt, an endemic budget deficit and slow growth. Last year’s budget deficit was estimated to have stood at $6.7 billion, or 11 percent of GDP, though the final figures have not been released.
Speaking to reporters Wednesday after Parliament passed a long-awaited new electricity plan designed to overhaul the ailing sector and slash subsidies to the state-owned Electricite du Liban, Hariri warned that Lebanon was heading toward an economic “catastrophe” unless the government implements strict austerity measures to reduce the budget deficit and snowballing national debt.
Restructuring the electricity sector, which is straining the state Treasury with $2 billion annually, and reducing the budget deficit are two key demands of international donors who pledged at last year’s CEDRE conference over $11 billion in grants and soft loans to finance important investment and infrastructure projects in Lebanon.
Khalil told Reuters Wednesday that the new draft budget projected a deficit of less than 9 percent of GDP compared to 11.2 percent in 2018. He said the economic growth forecast was 1.5 percent for 2019, and could rise to around 2 percent as the economy picks up.
The draft budget projected a primary surplus compared to a deficit in 2018, Khalil added. The draft represented an “introduction to more deficit reductions in the 2020 and 2021 budgets,” he said.
Aoun called for presenting the 2019 draft budget to the Cabinet very soon and considers the talk about cuts in the salaries and wages of state employees and retired military personnel as part of austerity measures to be “just ideas,” MP Ibrahim Kanaan said after meeting the president Thursday.
Given the country’s financial situation, Aoun, according to Kanaan, wanted the draft budget to be discussed by the Cabinet and later in Parliament “where every party airs its opinion transparently so that decisions can be taken in the interest of Lebanon and its state finances through fighting the waste [of public funds] and reducing the deficit with a general plan that reflects this budget.”
Kanaan, who was part of a parliamentary delegation that visited Washington last week, briefed Aoun on the results of the delegation’s talks with U.S. and World Bank officials on the economic reforms Lebanon plans to implement, as well as the U.S. sanctions on Hezbollah.
Asked about fears that the U.S. sanctions on Hezbollah and its affiliates might affect the banking sector, Kanaan said: “There are no new sanctions as I have said in Washington.”
Former MP Walid Joumblatt, the leader of Progressive Socialist Party, called for the ministers’ and MPs’ financial privileges to be fully annulled as a means to reduce the budget deficit.
“There is no escape from reconsidering some illogical benefits in the military corps and some civilian sectors … I am for the full cancellation of the privileges of ministers, MPs and everyone,” Joumblatt tweeted.
The PSP leader also called on local banks to contribute toward reducing the budget deficit.
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