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|13 May, 2019

Lebanese veterans blockade central bank in protest against draft state budget

The demonstrators blocked the main road outside the building, Hamra, choking rush hour traffic on one of Beirut's busiest streets

Retired soldiers take part in a protest over proposed cuts to the cost of military pensions and benefits in front of the central bank in Beirut, Lebanon May 12, 2019.

Retired soldiers take part in a protest over proposed cuts to the cost of military pensions and benefits in front of the central bank in Beirut, Lebanon May 12, 2019.

Reuters/Mohamed Azakir

Beirut- Retired Lebanese soldiers blockaded the central bank on Monday to warn the government against curbing their benefits in an escalation of demonstrations and strikes against plans to cut state spending.

A central bank official told Reuters the central bank was operating as normal despite the protest outside its Beirut headquarters. The demonstrators also blocked the main road outside the building on Hamra street with metal barricades, choking rush hour traffic.

With Lebanon suffering from years of low economic growth, long-stalled reforms are seen as more pressing than ever to put the state finances on a sustainable path.

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The government is seeking to finalise a budget which Prime Minister Saad al-Hariri says may be the most austere in Lebanon's history. The veterans fear their pensions could be cut.

The military and central bank have been seen as two pillars of Lebanon's stability since the end of its 1975-90 civil war.

Though all the main parties in Lebanon's sectarian system agree on the need to reform, a slew of strikes by state employees including central bank workers last week point to the political minefield ahead of them.

Lebanon is saddled with one of the world's heaviest public debt burdens at around 150 percent of GDP.

Retired soldiers began arriving at the central bank late on Sunday and early on Monday blocked all entrances.

"The protest will continue until there is a solution for the clauses concerning military personnel in the budget," said retired brigadier general Sameh Rammah.

FIRE TRUCK

Demonstrators were sitting peacefully on the pavement outside the central bank, some of them holding the Lebanese flag. A fire truck and five military vehicles were parked across the street.

"We will escalate .. until we paralyse all of Lebanon ... we will cut all the streets ... a revolution will happen if it has to," said 57-year-old protester Zeghayb Zeghayb.

Another cited disruption caused by the central bank workers' strike last week as the reason for targeting the institution. "We thought that this is the best way" to pressure the government, said Maroon Badr, 60.

Hariri said last week Lebanon was far from bankruptcy but failure to pass a “realistic” budget would be tantamount to a “suicide operation” against the economy.

He has been critical of strikes and protests against the draft budget, saying last week they were based on unfounded rumours about its contents.

Veterans held similar protests on Monday outside regional offices of the central bank in the cities of Tripoli and Tyre.

The public sector wage bill is the government’s biggest expense followed by debt servicing costs and the big subsidies paid annually to the state-owned power producer.

The draft budget aims to reduce the deficit to below 9% of GDP from 11.2% in 2018, the finance minister has said.

As part of the draft budget, the government approved increasing the tax on interest payments to 10% from 7% on Friday despite objections from the chairman of the Lebanese banking sector who warned the step would have bad economic consequences.

"It's a very bad move. It will lead to an economic contraction," said Nassib Ghobril, chief economist at Lebanon's Byblos Bank. The repercussions would include increased interest rates that would further discourage borrowing and investment.

"Raising taxes in this environment is not reform. There are plenty of ways to cut spending and even more ways to increase income without tax increases. They just have to fight smuggling, control the borders, deal with leakages at customs," he said.

(Additional reporting by Tom Perry and Laila Bassam; Editing by Tom Perry and Alison Williams) ((amina.ismail@thomsonreuters.com; +20 2 2394 8114;))

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