Lebanon's Cabinet to begin discussing austerity budget next week

Aoun and Hariri agreed to begin discussing the budget in a special meeting Tuesday, to be followed by successive sessions from Thursday until the draft has been endorsed.

Lebanese Parliament Speaker Nabih Berri, Lebanon's President Michel Aoun and resigned Prime Minister Saad al-Hariri meet ahead of a new government announcement at presidential palace in Baabda, Lebanon January 31, 2019.

Lebanese Parliament Speaker Nabih Berri, Lebanon's President Michel Aoun and resigned Prime Minister Saad al-Hariri meet ahead of a new government announcement at presidential palace in Baabda, Lebanon January 31, 2019.

REUTERS/Mohamed Azakir

BEIRUT: The Cabinet will meet in a special session next week to begin discussing an austerity draft budget, a key demand of international donors, to be followed by successive meetings until the 2019 fiscal plan has been approved, Finance Minister Ali Hasan Khalil said Thursday.

Khalil’s declaration, made after a Cabinet session chaired by President Michel Aoun at Baabda Palace, appeared to have eliminated roots of weekend tensions that arose between Aoun and Prime Minister Saad Hariri over the delay in presenting the draft state budget to the Cabinet. It also set the stage for final ratification of the draft budget by Parliament next month once it has been passed by the Cabinet.

Speaker Nabih Berri told visitors this week that the budget should be passed and sent to Parliament before May 31, when an extended spending measure expires. In March, Parliament approved extending until the end of May an emergency spending facility in the Constitution known as the “provisional 12th.”

As expected, the draft budget was not discussed Thursday since it was not listed on the Cabinet’s 37-item agenda and copies of the draft had not been distributed to ministers ahead of the session, apparently pending an agreement on the austerity measures the government plans to take to reduce the deficit.

During a closed-door meeting ahead of the Cabinet session, Aoun and Hariri agreed to begin discussing the budget in a special meeting Tuesday, to be followed by successive sessions from Thursday until the draft has been endorsed.

“Agreement was reached to hold a session devoted to discussing the state budget Tuesday morning after the end of the [Easter] holiday, to be followed by successive sessions starting from Thursday until the draft budget has been approved,” Khalil told reporters at Baabda Palace.At Hariri’s request, the Cabinet’s general secretariat will distribute Thursday copies of the amended draft budget in order for ministers to get acquainted with its details and prepare for discussing it next week, he said.

Khalil added that the Cabinet approved most of the items on the agenda, including bills calling for salary increases for employees and workers at the Tripoli Port and the Railway and Public Transport Authority in compliance with the 2017 salary scale law for the public sector.

Although approved by Parliament in 2017, Law 46, which stipulates raises in the salaries of public employees, has still not been fully implemented.

Aoun, according to local media, requested that a breakdown of the draft budget clearly showing “expected revenues and expenditures” be sent to Cabinet. “We must determine sources of revenues either through existing taxes and fees or through other channels,” Aoun said.

Khalil has submitted to Hariri a revised 2019 draft budget, which contains austerity measures and reductions in all ministries’ spending in a bid to slash the deficit. Last year’s budget deficit was estimated to have stood at $6.7 billion, or 11 percent of gross domestic product, though the final figures have not been released.

Khalil has said that if the budget’s proposed austerity measures prove successful, the deficit-to-GDP ratio could be cut by 2.5 percent in 2019, to bring it down to 9 percent. Reducing the deficit-to-GDP ratio, which reached 11 percent in 2018, by 1 percentage point every year over five years was one of the key pledges Lebanon made at the CEDRE conference held in Paris last year.

Slashing the budget deficit and enacting a string of key fiscal and economic reforms, including in the dysfunctional electricity sector, which is straining the state Treasury to the tune of $2 billion annually, are essential to unlock over $11 billion in soft loans and grants pledged at the CEDRE conference to finance investment and infrastructure projects in Lebanon.

Khalil Thursday again denied reports that the draft budget included cuts to civil servants’ salaries and social benefits, and reductions to retired military personnel’s pensions. He said the reason for the delay in presenting the budget was to allow all political parties to be informed of all the proposed austerity measures.

As part of tightening expenses, Khalil said the Cabinet discussed the issue of travel expenses allotted to delegations accompanying the president or the prime minister on their foreign trips.

“This matter [travel expenses] will be on the Cabinet agenda directly after finishing the budget sessions with the aim of agreeing on really rationalizing the travel expenses,” the finance minister said. He added that the Cabinet decided to stop the payment of any travel expenses by consent, except those pertaining to emergency political issues that are tied to the president or the prime minister.

Al-Jadeed channel reported in its new bulletin Thursday night that the Cabinet transferred 6 billion pounds ($4 million) in travel expenses to the presidency and premiership.

Meanwhile, the Social Affairs Ministry has canceled its contracts with 20 social support organizations for failing to comply with the ministry’s regulations despite multiple warnings.

The announcement was made by Social Affairs Minister Richard Kouyoumjian, who told a news conference Thursday that the contracts with these NGOs had cost the ministry LL531 million ($352,000), a significant expenditure for the ministry’s limited budget, which he said was “no more than 1 percent of the state budget.”

The 2018 state budget accorded the ministry 0.954 percent of the entire budget, according to the Finance Ministry.

Kouyoumjian did not provide the names of the affected organizations, saying that while they did not comply with all the terms set out by the ministry, they were still doing good work. “I do not want to insult any of them,” the minister said.

He said the NGOs were the ministry’s “primary partner in serving disabled persons, children, abused people, women, those suffering from addiction and the homeless.”

Asked for details on what regulations the affected NGOs had failed to comply with, a Social Affairs Ministry spokesperson told The Daily Star that the contract stipulations varied from organization to organization, and are related to issues such as operation hours and required training programs.

According to statistics provided by the source, the ministry has contracts with 594 NGOs divided across five categories.

The measure marked the first step in a wider cost-cutting and transparency campaign within the ministry.

Kouyoumjian said that written warnings had been sent to 30 additional organizations to comply with regulations before the end of 2019, or their contracts would also be canceled.

The minister also addressed the issue of adjusting payment to the NGOs, which is still based on a cost assessment from 2011, to reflect expenditures for 2019.

He said paying NGOs in the correct manner was a “priority” for the ministry. Representatives of dozens of NGOs contracted with the Social Affairs Ministry to provide services to disabled people told The Daily Star earlier this year that they had not received their payments from the government through all of 2018. - Additional reporting by Emily Lewis

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