WED 21 - 8 - 2019
May 10, 2019
The Daily Star
Lebanon: Govt to cut ministries’ spending by 20 percent
Hussein Dakroub| The Daily Star
BEIRUT: The Cabinet decided Thursday to cut all ministries’ budgets by 20 percent as part of austerity measures to reduce the deficit to 8 percent of GDP, down from more than 11 percent last year, Information Minister Jamal Jarrah said.
The Cabinet, which was initially expected to wrap up its discussions and endorse a draft austerity budget for 2019 by Friday, decided to extend its meetings until the weekend, apparently to allow ministers more time to resolve the divisive issue of cuts to public sector employees’ wages and retirement benefits.
“Today’s session lasted five hours during which the budget’s articles and the measures required to reduce current spending and operating expenses were discussed,” Jarrah told reporters after the Cabinet session chaired by Prime Minister Saad Hariri at the Grand Serail.
“The expenditures were discussed and the reduction rate for each article was defined so we can reduce between LL1 trillion to LL1.2 trillion ($800 million) from the 2019 budget.”
Jarrah said each minister would study these reductions in his ministry. “Starting tomorrow [Friday], we will discuss the articles of the ministries according to the directives set today regarding the reductions, so that we can reach the desired reduction. This way we will be able to reduce the budget deficit between 7 and 8 percent,” he said.
Jarrah said the Cabinet would resume the budget deliberations at 1:30 p.m. Friday. In response to questions, he said Friday’s session would not be the last and there might be further meetings Saturday and Sunday.
Asked if the 20 percent reduction in ministries’ budgets is an addition to the 20 percent introduced in the 2018 budget, Jarrah said: “It’s true, but the percentage is not 20 percent. This means it is of 8 or 6 or 2 percent for some articles and more for others. But we took the directives based on a study prepared by the premiership to see the reductions that would lead to a cutback of LL1.2 trillion.”
Nonetheless, the Cabinet appears to be still split over proposed cuts to public sector employees’ wages and end-of-service benefits, including medical and education assistance, a hot issue that had triggered a wave of strikes and protests by labor unions and retired military personnel, as well as employees of the Central Bank.
Asked if the proposed 15 percent reduction in civil servants’ salaries was the last solution, Jarrah said that the issue of salaries was put aside to see what could be done with the other articles. “There are new proposals by the ministers that can increase revenues and reduce expenditures, all of which are being studied. Tomorrow [Friday] the ministers will give suggestions and practical ways to reduce the budgets of their ministries,” he said. Thursday’s was the eighth Cabinet session in 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. 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.
Reducing the deficit-to-GDP ratio 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.
Lebanon is under growing international pressure to enact a series of key fiscal and economic reforms recommended at the CEDRE conference. The reforms are deemed essential to unlock over $11 billion in grants and soft loans pledged by international donors to bolster the ailing economy, which is suffering from a soaring national debt of $85 billion, slow growth and a high budget deficit.
With $85 billion in public debt, Lebanon has the world’s third largest debt-to-GDP ratio.
The Cabinet Thursday also approved cutting government funds for 5,000 mobile lines that were being used for free by public administration and ministry employees, Telecommunications Minister Mohamed Choucair said.
The move would save the government up to $2 million a year, Choucair said in a statement released by his media office. “Users of these lines have been given two months to transfer the bills to their own accounts, otherwise the lines will be cut,” he said.
Hezbollah’s parliamentary Loyalty to the Resistance bloc called on the country’s banks to play a key role in slashing the budget deficit.
“As the Cabinet prepares to endorse the budget and refer it to Parliament, the bloc affirms that the measures needed to ease the suffocating financial crisis and rescue the country from its repercussions require that the government takes serious steps for financial and economic reforms, fighting corruption, curbing waste and stopping tax evasion. They also require banks to shoulder their national responsibilities and play a weighty role in reducing the deficit,” the bloc said in a statement after its weekly meeting.
Meanwhile, the head of Banque du Liban employees’ syndicate said their suspended strike would remain on hold to give more room for officials to discuss the draft budget.
Abbas Awada said the syndicate’s general assembly meeting scheduled for Friday had been put off to allow for Cabinet discussions on the budget, according to statement carried by the state-run National News Agency.
Awada’s announcement came after BDL employees said Tuesday that they were suspending their strike until Friday, when the general assembly was supposed to meet to decide on the next steps in the protest. With the meeting canceled, the strike appears to be suspended indefinitely.
BDL employees fear that Cabinet could cut their wages and benefits in the 2019 budget. They were also worried they would be affected by Article 61 of the budget, which calls for limiting the salaries of employees at autonomous public institutions, including the Central Bank, to 12 months’ compensation. BDL workers currently receive 16 months’ worth of salaries per year.
The strike had disrupted some operations of the Central Bank and commercial banks, reportedly causing cash shortages in some banks.
Also, the coordination committee of retired military personnel called for a “general mobilization” and a resumption of street protests against proposed cuts to their wages and end-of-service benefits.
Khalil: Cabinet to send draft budget to Parliament early next week
BEIRUT: Cabinet is likely to send a draft austerity budget to Parliament at the beginning of next week, according to Finance Minister Ali Hasan Khalil.
“Discussions on the budget are progressing at a good pace and we aim to finish during Friday’s session,” Khalil told Al Joumhouria Thursday.
But Khalil added that “the matter may require an additional session,” after which he expects Cabinet will approve the draft budget and send it to Parliament early next week.
After Thursday’s Cabinet session, Information Minister Jamal Jarrah told reporters that Friday’s meeting would not be the last and there might be further sessions Saturday and Sunday.
The extension will supposedly provide ministers with more time to resolve the divisive issue of cuts to public sector employees’ wages and retirement benefits.
Jarrah also announced Thursday that Cabinet had decided to cut all ministries’ budgets by 20 percent as part of austerity measures to reduce the deficit to 8 percent of GDP, down from more than 11 percent last year.
Asked if the 20 percent reduction in ministries’ budgets is an addition to the 20 percent introduced in the 2018 budget, Jarrah said: “It’s true, but the percentage is not 20 percent. This means it is of 8 or 6 or 2 percent for some articles and more for others. But we took the directives based on a study prepared by the premiership to see the reductions that would lead to a cutback of LL1.2 trillion [around $800 million].”
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