BEIRUT — Lebanon’s Finance Ministry on Thursday sent the long-awaited 2022 draft budget proposal to the government, after many weeks of speculation about its fate.
The budget, which is a prerequisite to any headway on talks with the International Monetary Fund, is one the first items on the agenda for Monday’s scheduled cabinet meeting at the Presidential Palace in Baabda. This meeting will be the government’s first since Oct. 12 — a hiatus that resulted from concern that Hezbollah and Amal Movement affiliated ministers would boycott any session convened over their dissatisfaction with cabinet not taking a stance on Judge Tarek Bitar’s leadership of the investigation into the 2020 Beirut port explosion. The two Shiite parties last weekend acquiesced to meet to discuss the draft budget.
While the fact that there is a budget proposal on the table at all represents progress, financial experts who spoke to L’Orient Today said the document itself leaves much to be desired.
“Truly underwhelming”, said former Economy and Industry Minister Nasser Saidi after reviewing the 2022 budget proposal.
The budget proposal forecasts a deficit of LL10.26 trillion — 20.77 percent of expenditures — before accounting for a long-term loan to Electricité du Liban of LL5.25 trillion. Revenues are estimated at LL39.15 trillion and expenditures at LL49.42 trillion.
These forecasts reveal a threefold increase in revenues, a doubling in expenditures and the deficit from 2021. Although the budget prepared by former Finance Minister Ghazi Wazni in early 2021 is still based on the original peg of LL1,507.5 to the US dollar, in the span of the last two years, the lira has lost 90 percent of its value, and prices have increased sevenfold.
The heads of some of the public institutions contacted by L’Orient-Le Jour, criticized the budget proposal as relying on estimates that “make no sense,” given that they were based on “numbers they submitted to the Finance Ministry in March of last year,” when the parallel market exchange rate was still around LL11,000 to the dollar and fuel was still being subsidized. One official noted that “the amounts allocated are not enough to maintain the minimum service level.”
Among the most important changes introduced is a change in the bracket amounts for taxes but not the tax rate, increase in deposit insurance from LL75 million to LL600 million on existing accounts and to $50,000 on “fresh funds” accounts. The budget leaves the finance minister with the discretion to determine the dollar to lira exchange rate for the purpose of tax calculation.
This budget is the building block for the government’s economic recovery plan and should pave the way for more advanced discussions with the International Monetary Fund. For Saidi, the government has once again missed a historic opportunity to initiate reforms. In his opinion, this budget should have introduced fiscal and structural reforms, reduced the deficit and tackled the restructuring of the banking sector, EDL and telecom operators as well as the central bank.
He worries that the introduction of a two tiered system for deposit insurance is an attempt to get a blanket endorsement from Parliament for the full lirafication of the deposits.
In any event, the 2022 budget faces a long road ahead before it is realized — if it is indeed ever realized. The first challenge is securing cabinet approval. Although Hezbollah and the Amal Movement have agreed to return to the table, for the purpose of discussing the budget and matters related to the improvement of the living standards of the Lebanese people, the issue at the heart of cabinet’s monthslong paralysis persist and Monday’s meeting will be a first test for this new arrangement.
However, even if everything goes well on Monday, as Parliamentary Finance and Budget Committee head MP Ibrahim Kanaan previously told L’Orient Today, it could take the government weeks to discuss the budget proposal. And even once it has the government’s seal of approval, the draft must still be sent before parliamentary committees before being voted on in Parliament.
BEIRUT — Lebanon’s Finance Ministry on Thursday sent the long-awaited 2022 draft budget proposal to the government, after many weeks of speculation about its fate. The budget, which is a prerequisite to any headway on talks with the International Monetary Fund, is one the first items on the agenda for Monday’s scheduled cabinet meeting at the Presidential Palace in Baabda. This meeting...