The chairman of the Finance and Budget Committee, Ibrahim Kanaan, in Parliament. (Credit: NNA)
Meeting in Beirut between 11 a.m. and 1:30 p.m., the Finance and Budget Committee completed Thursday its review of the draft budget for 2022, but failed to decide on all outstanding issues, MP Ibrahim Kanaan (FPM/Metn), who chairs the committee, announced in a series of tweets published after the meeting. The budget will now be sent to Parliament’s General Assembly for further discussion.
“My report on the 2022 budget will include all remarks and objections, what was approved and what was not, and this is in the hope that the 2023 budget will be better developed, contain clear reforms and not just list numbers and make the [taxpayers] pay the price of the executive's failed policies,” the MP said in one of his tweets.
According to Kanaan, the commission has forwarded a draft that proposes two scenarios: one with an exchange rate set at LL12,000 to the dollar, and another with the rate set at LL14,000, based on the rates proposed by the Finance Ministry. The fate of several provisions that have not been finalized would depend on the scenario chosen.
Kanaan, however, did not provide any details regarding the numerical targets for the budget deficit, revenues and expenditures.
The draft budget submitted by the government in February was based mainly on an exchange rate of LL20,000 to the dollar, but also included some projections based on the official parity of LL1,507.5, which is no longer applicable in practice, with the parallel market rate currently around LL34,000.
Bad budget or provisional twelfth rule
“We’re between a rock and a hard place,” Kanaan wrote in another tweet, as the budget could either be passed in its current form by the legislature or abandoned,, which would force the state to continue to operate under the provisional twelfth rule, to be equally problematic for the maintenance of state services.
The provisional twelfth rule, dictated by Article 86 of the Constitution, allows the state to continue operating in the absence of a budget law, based on spending the equivalent of one-twelfth of the budget provided for in the previous year’s finance law.
However, this option can only be activated during the month of January of the year in which the budget under discussion in Parliament is to be implemented, and only in the event that Parliament fails to approve the draft budget in time. In practice, this rule was abused to allow the state to operate without a budget from 2005 to 2017, and then from 2021 to today.
At the press conference in Parliament following the Thursday meeting, another member of the committee, Ghassan Hasbani (LF/Beirut I), pointed to the “lack of clarity” in the draft budget, stressing in particular that it did not contain a “clear” strategy to get Lebanon out of the crisis into which it has been sinking since 2019, and did not resolve the issue of the exchange rate.
Containing nearly 140 provisions, not counting the various ministerial budgets, those of public institutions and annexes, the draft budget for 2022 was approved in February by Najib Mikati’s government.
The adoption of a credible state budget, even outside the constitutional deadline that expired earlier this year, is one of the conditions set by the International Monetary Fund to agree to convert the preliminary agreement reached on April 7 with Lebanon into a final financial assistance program.
This article was originally published in French in L’Orient-Le Jour.
