Lebanon's Cabinet split over budget, ‘hot points’ still to come

The Economy and Trade Minister expressed hope that the Cabinet would wrap up discussions and endorse the budget by Friday

  
Image used for illustrative purpose. Lebanese President Michel Aoun heads the first meeting of the new Saad al-Hariri's cabinet at the presidential palace in Baabda, Lebanon, February 2, 2019.

Image used for illustrative purpose. Lebanese President Michel Aoun heads the first meeting of the new Saad al-Hariri's cabinet at the presidential palace in Baabda, Lebanon, February 2, 2019.

REUTERS/Mohamed Azakir

BEIRUT: The Cabinet is making slow progress in discussing a draft austerity budget but remains split over controversial issues such as taxes on interest from banking deposits and an article that calls for cutting the 16-month salaries of autonomous institutions, ministerial sources said Wednesday. “Cabinet discussions on the draft budget are constructive and heading in the right direction. We are making progress every day in the budget discussions in order to arrive at an understandings on all the provisions,” Economy and Trade Minister Mansour Bteich told The Daily Star.

Citing the need to maintain “Cabinet solidarity,” Bteich declined to elaborate on the pending divisive issues that are delaying agreement among ministers.

However, the minister expressed hope that the Cabinet would wrap up discussions and endorse the budget by Friday.

Referring to divisive issues, LBCI channel quoted Foreign Minister Gebran Bassil as saying: “We have not yet reached the hot points in the budget. We need more time.”

Both Bteich and Bassil spoke shortly after the Cabinet met under Prime Minister Saad Hariri at the Grand Serail for a seventh round of talks as part of a series of meetings devoted to examining the draft budget, which seeks to reduce state spending and generate revenues in order to cut the deficit, a key demand of international donors.

Hariri has promised to send the draft to Parliament quickly so that it can be ratified before the end of May, when an extraordinary spending measure is set to expire.

Officials are looking to reduce the country’s deficit to below 9 percent of GDP, down from more than 11 percent last year.

Information Minister Jamal Jarrah echoed a similar optimistic tone, saying there was an intention among ministers to endorse the budget by Friday.

He said the Cabinet would resume discussions Thursday.

“We discussed the taxation items in general, and are still waiting for answers on the financial estimates, which we will get tomorrow [Thursday]” or Friday, Jarrah told reporters after the Cabinet session.

He added that Thursday’s agenda would focus on the budget allocations for the administrations and each ministry.

“We hope to finish this Friday, pending answers from some ministers,” he said.

Asked if Article 61 in the draft budget that calls for canceling the 16-month salaries of employees in autonomous institutions such as the Central Bank, the Beirut Port, the state-run telecoms company Ogero and the National Social Security Fund, has been axed as a result of protests by the staff of these institutions against proposed cuts to their wages and benefits, he said: “No, it is still under discussion. There is an idea regarding the 14 months [salaries] but it has not yet been decided.”On whether the Cabinet would be able to endorse the budget by Friday after divisive issues had been postponed, Jarrah said: “There are interrelated items. We want to make comparisons. ... Some ministers asked for 24 hours to give us the exact figures upon which we will take decisions.”

Despite the unprecedented strike by Banque du Liban employees, Jarrah praised the Central Bank as the most cooperative institution with the government over its austerity proposals.

Asked if BDL employees, who Tuesday announced a three-day suspension of their open-ended strike to protest against proposed reductions to their salaries, were excluded from the Article 61, Jarrah said: “The staff of the Central Bank constitutes another issue. They have their own internal system.

“But the Central Bank is one of the most positive institutions in the matter of reducing salaries and the solutions we are offering. It is the most cooperative institution with the government, although it is an independent institution governed by the code of money and credit. It is the institution that responded the most positively to the government’s proposals.”

Asked if the article on “military equipment” concerning retired military personnel had been dropped, Jarrah said: “Friday the Interior and Defense ministries will submit proposals to deal with the situation of the security agencies and a suitable decision will be made on them. There was a discussion on whether the allowance would be part of the salary or not. All these issues will be dealt with Friday.”

Military veterans announced Tuesday they were formally suspending their weekslong protest action against budget articles that would see their retirement wages or benefits cut.

Their decision came after a delegation of retirees met with Hariri, and after Defense Minister Elias Bou Saab said all ministers had agreed that there should be no reductions in what is set aside for so-called equipment compensation for veterans that includes remunerations for expenses accrued during their service.

The Cabinet has repeatedly postponed studying articles related to proposed cuts to public-sector wages and benefits and increased taxes on interest made from banking deposits, among other things.

These proposals led state employees to stage dayslong strikes, most of which were suspended Tuesday.

But judges continued their walkout Wednesday, protesting at Beirut’s Justice Palace to demand that the judiciary remain independent and that it not be impacted by austerity measures.

A leaked portion of the draft 2019 budget includes an increase in taxes on income from interest on bank deposits from 7 percent to 10 percent. The proposal has met stiff opposition from banks.

The Cabinet has also agreed in principle to cut the benefits of ministers, lawmakers and former MPs in a bid to show the public that sacrifices start from the top.

Speaker Nabih Berri said the endorsement of the draft budget provided an opportunity to overcome the economic crisis.

“The wrapping up of the budget will create an atmosphere of confidence, even before it is approved by Parliament,” MP Ali Bazzi, from the speaker’s parliamentary bloc, quoted Berri as saying during his weekly meeting with lawmakers at his Ain al-Tineh residence.

Berri, according to Bazzi, stressed that the rights of the poor and those with limited income would not be affected by the austerity measures.

Berri also expressed his resentment over rumors circulated on social media platforms claiming that Lebanon was on the verge of bankruptcy.

“The country is not bankrupt and the monetary situation is sound and under control,” he said.

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