Cabinet to tackle budget; optimism on vote law

The Cabinet is set to begin Wednesday discussing the 2017 draft state budget

Traders are seen busy working in BEMO Bank's dealing room before the end of Beirut's stock exchange trading session in Beirut, Lebanon in this April 3, 2006

Traders are seen busy working in BEMO Bank's dealing room before the end of Beirut's stock exchange trading session in Beirut, Lebanon in this April 3, 2006

REUTERS/Jamal Saidi

08 February 2017

BEIRUT: The Cabinet is set to begin Wednesday discussing the 2017 draft state budget as some officials sounded upbeat that an agreement would be reached soon on a new vote law to govern the upcoming parliamentary elections.

“Tomorrow’s [Wednesday’s] Cabinet session will be devoted mainly to debating the 2017 draft state budget,” an official source at Baabda Palace told The Daily Star Tuesday. He said the Cabinet agenda also includes some items pertaining to foreign donations to Lebanon.

The source said he did expect the Cabinet session, to be chaired by President Michel Aoun at Baabda Palace, to approve the draft budget and send it to Parliament for a final ratification. He said it would take several Cabinet sessions before the draft budget could be ready to be sent to the legislature.

Finance Minister Ali Hasan Khalil has presented the draft budget to the Cabinet that includes the public sector’s controversial wage hike bill.

Economy Minister Raed Khoury said the draft budget might or might not include the public sector’s wage scale bill that could be tied to a series of proposed taxes at a later stage.

The approval of the 2017 draft state budget is seen as crucial for controlling state finances and improving the battered economy, burdened by more than $74 billion in public debts, as Lebanon has not ratified a state budget since 2005, leading to uncontrolled extra-budgetary spending in millions of dollars.

However, differences within the Cabinet and in Parliament over the wage hike bill for civil servants and demands by key blocs, mainly Aoun’s parliamentary Change and Reform bloc, for the auditing of $11 billion in extra-budgetary spending by former Prime Minister Fouad Siniora’s government between 2005 and 2009, might hinder the ratification of the draft state in Parliament.

The draft calls for a series of new taxes to finance a higher salary scale for civil servants and public and private schoolteachers who have staged demonstrations and sit-ins over the past four years to press for government action on this bill, whose estimated cost is around LL1.2 trillion. Among the proposals are increasing the value added tax from the current 10 to 11 percent, increasing taxes on interest rates on customer deposits from 5 to 7 percent, increasing taxes on corporate profits from 15 to 17 percent, and slapping a 15 percent on tax on real estate transactions.

Meanwhile, two ministers voiced optimism that the rival factions would eventually agree on a new voting system to replace the disputed 1960 majoritarian law ahead of the Feb. 21 deadline for elections scheduled for May 21.

“I am very optimistic about reaching an agreement on a new hybrid vote law that includes provisions from the majoritarian and proportional systems,” Information Minister Melhem Riachi told The Daily Star. He rejected the notion that a hybrid vote law was dead in the wake of a fierce campaign spearheaded by MP Walid Jumblatt’s parliamentary Democratic Gathering bloc against a hybrid proposal that calls for electing a part of parliamentary seats under a majoritarian system and another part under a proportional vote law. The proposal was floated by Foreign Minister Gebran Bassil, leader of the Free Patriotic Movement, during meetings of the four-party committee that also includes Khalil from the Amal Movement, Nader Hariri, chief of Prime Minister Saad Hariri’s staff, and Hezbollah MP Ali Fayyad.

“The hybrid law proposal is still on the cards. In addition to the four-party committee’s meetings, bilateral and trilateral consultations are being held to agree on a hybrid vote law ahead of the Feb. 21 deadline,” Riachi said.

Riachi, one of three Lebanese Forces ministers, did not rule out the possibility of postponing parliamentary elections until September in order to hold them under a new hybrid vote law.

State Minister for Combating Corruption Nicolas Tueni from the FPM echoed a similar optimistic note over an electoral law deal. “There are no fears of a political setback to the new [Aoun] era. ... Matters are heading toward a settlement over an electoral law that gains the approval of all the parties,” Tueni told the Voice of Lebanon radio station (93.3).

Aoun Monday reassured the Lebanese that there would be a new electoral law to replace the 1960 system. “President Aoun’s firm stance on a new electoral law will not change. He is determined to hold the elections under a new law,” the source at Baabda Palace said.

However, Interior Minister Nouhad Machnouk said Monday his ministry was preparing to hold the elections under the 1960 law as he appeared to be skeptical about rivals being able to agree on a new voting system soon.

The Future Movement’s parliamentary bloc stressed the importance of holding parliamentary elections on time without any delay under a new law reached by consensus among various parties according to the Constitution and the Taif Accord.

“The bloc also underlined the importance for the government to exert all possible efforts to finalize the draft state budget and send it to Parliament so that [lawmakers] can study and approve it [to ensure] a return to a regular financial control and financial and monetary stability,” said a statement issued after the bloc’s weekly meeting. It added that the approval of the draft budget would set the “wheel of the government and state institutions into motion, bolster national economy and reactivate the private sector’s role.”

Lebanese Forces MP George Adwan called on Aoun and Hariri to devote Cabinet sessions from now on to a new electoral law as dictated by the Constitution. “The Constitution states that a new vote law should be prepared by the Cabinet and then sent to Parliament,” Adwan told reporters.

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