Lebanon's PM optimistic on budget progress this week

Hariri also underscored the need for rival Lebanese parties to abide by the government’s declared policy of dissociation from regional conflicts

Lebanon's Prime Minister Saad Hariri gestures during the Paris Peace Forum after the commemoration ceremony for Armistice Day, 100 years after the end of the First World War, in Paris, France November 11, 2018. Thomas Samson/Pool via REUTERS

Lebanon's Prime Minister Saad Hariri gestures during the Paris Peace Forum after the commemoration ceremony for Armistice Day, 100 years after the end of the First World War, in Paris, France November 11, 2018. Thomas Samson/Pool via REUTERS

BEIRUT: Declaring that a draft austerity budget needed a decision by the Cabinet, Prime Minister Saad Hariri said Sunday he hoped the 2019 fiscal plan would be passed by ministers and referred to Parliament this week for final ratification. He reiterated that Lebanon had an opportunity to stop the squandering of public funds, control state spending and carry out reforms to the ailing economy.

Hariri also underscored the need for rival Lebanese parties to abide by the government’s declared policy of dissociation from regional conflicts.

“It is essential to say today that the dignity of every Lebanese stems from the dignity of the Arabs and offending any Arab state amounts to offending Lebanon,” Hariri said in a speech at an iftar hosted by the Future Movement at the Seaside Arena Sunday.

Referring to the Cabinet accord on the dissociation policy, Hariri said: “Consensus on dissociation and noninterference in the internal affairs of Arab states was aimed to protect Lebanon from the region’s struggles. Insistence on violating the dissociation amounts to a direct call for striking the interests of Lebanon and the Lebanese in Arab countries.”

Commenting on recent sabotage attacks on oil tankers in the UAE and on an oil pipeline in Saudi Arabia, Hariri said: “Lebanon does not need stances that threaten its economic interests and its relations with [Arab] brothers, whose history with us was a history of support and embracing the Lebanese from all sects.”

The prime minister was clearly referring to Hezbollah’s deep involvement in the war in Syria. Also, Hezbollah leader Sayyed Hasan Nasrallah and other party officials had frequently lambasted Saudi Arabia and other Arab Gulf states over the wars in Yemen, Syria and Iraq.

Hariri’s speech came before he chaired a Cabinet session at around 10 p.m. Sunday to continue discussions on a draft austerity budget that aims to cut Lebanon’s deficit from an estimated 11 percent of gross domestic product in 2018 to 9 percent.

The session, held at the Grand Serail, was the 15th in a series of meetings devoted to examining the draft budget and was ongoing when The Daily Star went to print.

Finance Minister Ali Hasan Khalil was expected to present the budget’s final figures, detailing revenues, expenditure and the shortfall, local media reported. Slashing the budget deficit and reducing subsidies to the state-run Electricite du Liban, estimated at $2 billion annually, are two key demands of international donors. In his speech, Hariri stressed that there was no escape from implementing essential reforms recommended at last year’s CEDRE conference to improve the economic situation.

“Our proposals [on reforms] are clear and are already on the table. What matters is to agree on measures that can no longer be avoided,” Hariri said. “Honestly, there is unanimity on diagnosing the disease and there is semi-unanimity on the cure. There are also bold and responsible proposals on the table.”

Responding to critics who complained about the delay in passing the budget, Hariri said: “I would like everyone to know that working on the 2019 budget is not an ordinary job. We are working to lay down complete foundations for serious financial reforms for the next five years and to draft principles that should be adopted in the 2020 and 2021 budgets.”

“I have a great hope that today’s [Sunday’s] session will give a boost in this direction and that next week will be a week for referring the draft budget to Parliament,” he said. “Decisions need to be taken and the Cabinet is there to take decisions and tell all the Lebanese that we have a chance that shouldn’t be wasted and a road map to stop squander, control spending and achieve reforms.” Citing an Arab proverb that says: “It is better to have a temporary pain than permanent pain,” Hariri said: “We should not postpone things we can do today.”

“Our economy has paid the price of delay, indecision and avoiding reforms for long years,” he said. He stressed the need for carrying out “serious reforms and financial and economic policies that can help in reducing the deficit, dealing with the debt and curbing the waste [of public funds].”

It was Hariri’s third plea in as many days underlining the importance of enacting key fiscal and economic reforms recommended at the CEDRE conference. The reforms are deemed essential to unlock over $10 billion in grants and soft loans pledged by international donors to bolster the weak economy, which is saddled with a soaring public debt of $85 billion, equivalent to about 150 percent of GDP, slow growth and a high budget deficit.

Despite passing some items in the budget, ministers remain split over controversial measures related to proposed cuts to public-sector wages and retirement benefits, including those related to military veterans.

They are also yet to agree on cutting wages for top public officials who include the ministers themselves as well as lawmakers and former MPs.

Khalil said the 2019 budget would slash debt servicing costs by LL1 trillion ($660 million) by issuing Treasury bonds at a 1 percent interest rate.

“This matter will happen through coordination between the Finance Ministry, the Central Bank and the banks after the budget’s approval to issue Treasury bonds in Lebanese currency in the range of LL11 trillion at an interest rate of 1 percent,” he told Reuters Saturday.

The savings would put a LL1 trillion dent in the state’s debt servicing costs, which stood at LL7.5 trillion in 2017.

Figures for 2018 have not been made public.

Speaking to reporters at his office Saturday, Khalil said the budget discussions should be wrapped up by Sunday in order to “end the atmosphere of chaos and rumors.”

Foreign Minister Gebran Bassil, who had presented his own proposals to the Cabinet for fixing the ailing economy, urged patience in passing the budget, during a tour in north Lebanon’s Koura district.

“We are working on reform through the budget. The solutions we offer are not all talk and we will persist, even if it takes time to come out with a better budget,” he said in a speech during a tour of the northern district of Koura Saturday.

Speaking to reporters after meeting with Maronite Patriarch Beshara Rai in Bkirki Sunday, Bassil, the head of the Free Patriotic Movement, said: “Today we, along with Bkirki [the seat of the Maronite patriarch], will carry out economic resistance to liberate our country from the economic and financial decision that made it bankrupt and made all of us hostages to the policies of corruption and the squandering of public funds.”

The Cabinet sessions on the budget have been accompanied by street pressure exerted by public-sector employees and military veterans to protest proposed cuts to their wages and end-of-service benefits.

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