Lebanon's Cabinet endorses austerity budget

Lebanon's debt to GDP ratio, which ballooned to 11.5 percent in 2018, has been slashed to 7.5 percent, Information Minister Jamal Jarrah said.
by Georgi Azar

27 May 2019 | 18:42

Source: by Annahar

  • by Georgi Azar
  • Source: Annahar
  • Last update: 27 May 2019 | 18:42

President Michel Aoun (left) seen pictured with Prime Minister Saad Hariri (right) on Monday, May 27, 2019 at the Baabda Presidential Palace (NNA)

BEIRUT: Lebanon's Cabinet endorsed Monday the final draft budget to be submitted to Parliament for ratification, as pressure mounts on the small Mediterranean country to get its finances in order.

The budget, one of the "most austere in the history of Lebanon" as Prime Minister Saad Hariri recently said, features a number of measures to raise revenues and decrease spending.

Lebanon's budget deficit, which ballooned to 11.5 percent in 2018, will be reduced to 7.5 percent, Information Minister Jamal Jarrah said. 

To bolster the state's coffers, the Cabinet endorsed the second tax hike in two years on the interest earned on deposits and government-issued treasury bills and bonds, much to the ire of the banking sector. 

At the start of 2018, the tax rate was increased from 5 to 7 percent before being hiked to 10 percent in the 2019 budget, which would raise around $350 million, according to estimates.

Tax collection from companies and individuals, which has been lackluster, was also a hot topic of discussion. The income tax on individuals and enterprises, generating an annual income of LBP 225 million or more, has been raised to 25 percent.  

A 2 percent tariff has also been added on imported products, excluding hybrid and electric cars, food and medicine, as well as machinery and raw materials used for local production.

The budget also revokes a number of custom privileges, most notably to those extended to members of Parliament and Ministers who benefited from exemptions on purchased cars, while also dismantling preferential treatment on car registration and vehicle inspection fees. 

Fees on special license plates, tinted windows, and licenses to carry a firearm have also been raised. 

License plate fees will vary between LBP 60,000 and LBP 2.3 million while a tinted window license will now cost between LBP 500,000 and LBP 1 million annually. The fee on firearm licenses has been set at LBP 250,000. 

Shishas orders, a predominant sight at most Lebanese cafés, have been slapped with an LBP 1,000 fee per order. 

Pension salaries of civil servants, as well as salaries of current and former prime ministers, house speakers, MPs, and Presidents, will now be subjected to income tax. 

Other cuts include a 3 percent deduction on retirement salaries for army personnel to fund their healthcare and social assistance benefits.

To decrease spending further, the budget freezes public sector employment for a period of three years and discourages early requests for retirement. 

Those wishing to retire prior to reaching the retirement age will be faced with a 25 percent cut on all benefits. The budget also increases the age of retirement by three years for army and security personnel.

It also caps the salaries paid to public sector employees to 12 months, down from 16 months per year at a number of government bodies. Those affected include workers from the state-owned telecom company Ogero, Port Beirut, and others. 

The draft budget also caps basic public-sector salaries at 20-times the minimum national salary, the equivalent of LBP13.5 million per month, and limits all the benefits that civil servants receive to 75 percent of their annual basic salary.

The budget, coupled with the implementation of drastic reforms to curb corruption and the squandering of public funds, would pave the way for officials to secure the $ 11 billion lifeline agreed upon in Paris last year aimed at kickstarting Lebanon's economy and revamping its infrastructure.  

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