Cabinet to discuss austerity budget as protests grip Beirut

After years of overspending, Lebanon now finds itself as the third-most indebted country in the world
by Georgi Azar

30 April 2019 | 10:41

Source: by Annahar

  • by Georgi Azar
  • Source: Annahar
  • Last update: 30 April 2019 | 10:41

Lebanese President Michel Aoun, right, meets with Prime Minister Saad Hariri, during the first meeting of the Lebanese cabinet at the Presidential Palace in Baabda, east of Beirut, Lebanon, Saturday, Feb. 2, 2019. (AP)

BEIRUT: Lebanon's Cabinet is set to discuss Tuesday the much anticipated 2019 budget, as street protests grip the capital amid talks of impending austerity measures. 

After years of overspending, Lebanon now finds itself as the third-most indebted country in the world after Japan and Greece, with concerns mounting over its ability to maintain the Lira peg and follow through on payments. 

Lebanon's budget deficit ballooned to 11 percent of GDP in 2018, or around $4.5 billion according to estimates, with officials seeking to reduce that by 1 percent every year over the next 5 years. Doing so would set the stage for Lebanon possibly unlocking the CEDRE IV donor package agreed upon in Paris last year. 

"We must reduce public spending to avoid a crisis," Prime Minister Saad Hariri said earlier this month, while Finance Minister Ali Hassan Khalil predicted a deficit of less than 9 percent of GDP compared to 11 percent in 2018 if certain measures are implemented. 

Both officials warned of "wide reductions" and harsh austerity measures, the likes of which have never been seen across Lebanon's history. 

Some of the measures include a 50 percent reduction in the salaries and allowances of MPs, ministers, and the President, as well as an undetermined reduction in the salaries of their retired colleagues. 

A three-year public hiring-suspension is also on the books, with employment to resume at a rate of half the number of those who retired during that period. 

Other measures include a reduction of the annual paid leave from 20 to 15 days, a three percent cut to the pensions of retired military personnel including cuts to medical and social aid, the abolishment of early retirements, and a cap on other forms of compensation and the suspension of additional salaries. 

To raise revenues, taxes on interest earned on bank deposits, certificates of deposit, and treasury bills will increase from 7 to 10 percent, including a corporate tax hike. 

Lawmakers from across the board have been calling for drastic austerity measures to safeguard Lebanon's economy. Proposals, however, differ, with some wary of Foreign Minister Gebran Bassil's recommendation to slash public wages and end of service indemnities.

Lebanese Forces leader Samir Geagea called for the Cabinet to focus on other solutions, like cracking down on corruption, tax evasion, and seafront property violations. 

Despite the early condemnation, including from Hariri and members of Hezbollah's parliamentary bloc, officials now seem to have come to terms with what lies ahead. 

Hours before Cabinet was set to convene, retired military and security personnel took to the streets early Tuesday morning to vent their frustration and object these proposals. 

The demonstrators, made up of mostly of army veterans, blocked the entrance to Lebanon's central bank and Beirut's seaport.

The Cabinet session will be chaired by President Michel Aoun at the Baabda Presidential Palace, with talks continuing on Thursday and Friday. 

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