The 2022 budget, the first since 2020 and nine months overdue, has finally been approved.
Amid an acute crisis that commenced in 2019 and protests around Parliament, MPS finally voted on the budget text Sept. 26, after a session interrupted by a two-hour recess, during which MPs hurriedly sifted through the remaining 121 articles of the draft cabinet presented almost a year ago.
As soon as the finance bill came out of the oven, some MPs immediately slammed it, accusing the government of having been sloppy in calculating anticipated expenditures and revenues and of having improvised even less-viable amendments during the session.
“The government managed to magically reduce the public deficit by about six trillion lira during the recess,” MP Ibrahim Kanaan (FPM/Metn), and chairman of Parliament’s Finance and Budget Committee, told L’Orient-Le Jour.
“At this rate, I think [the government] could have reached a balance, or even a surplus, if MPs had been absent for a few more hours,” he quipped.
Exchange rate at LL15,000
The budget estimates public spending at LL40.87 trillion, with revenues of only LL29.986 trillion, according to official figures.
The deficit therefore stands at LL10.887 trillion.
“The deficit was originally set at just over LL16 trillion, but the prime minister officially announced that the amount of revenue could be increased by about LL6 trillion, citing revenues from airport taxes (paid in dollars by airlines since Aug. 11,) and the increase in telecom tariffs (in effect since July 1),” Kanaan added.
These amendments will, in principle, be incorporated in the final version of the law.
It is unclear how this deficit will be eliminated, given that the country has been in default on its foreign currency debt since March 2020 and can only rely on treasury bills in lira to pay its debts.
Better than ‘nothing’
Kanaan said the exchange rate used to calculate the budget was set at LL15,000 to the dollar. It remains unclear how this rate will be reflected in the budget, especially since the government’s initial plan was to use a combination of rates.
For Kanaan, the government’s projections are still inconsistent, despite the committee’s having held several meetings in recent months to review the project.
The Lebanese Forces appears to share this position.
This was suggested by Georges Adwan, the chairman of Administration and Justice Committee on Administration and Justice, who said in a press statement that his party “contests the figures,” suggesting that the committee plans to examine them closely.
The Amal movement, led by Parliament Speaker Nabih Berri, seems satisfied with the situation.
Amal MP and former Finance Minister Ali Hassan Khalil said it was better “to have a budget than nothing at all,” arguing that the voices raised against this budget were indirectly contesting the rights of retired military personnel.
Civil servants’ salaries are still calculated on the basis of the official rate of LL1,507.5 to the US dollar, while the lira has lost more than 95 percent of its value since the beginning of the crisis.
What the IMF wants
Caretaker Prime Minister Najib Mikati seems to have been pushing hard for the budget to be passed, though his government re-launched discussions between Lebanon and the International Monetary Fund (IMF) to unlock a multi-billion-dollar financial assistance package almost a year ago.
The adoption of the 2022 budget was among the preconditions for any financial assistance mentioned in the staff-level agreement reached between the two sides on April 7. At the end of its visit to Beirut last week, the IMF delegation to Lebanon reminded the Lebanese side that it was now crucial to pass a credible 2023 budget, in line with expectations and to do so within the deadline.
The IMF also insisted that the authorities adopt a unified exchange rate system to be disseminated by the Bank of Lebanon’s Sayrafa platform (LL29,800 to the dollar yesterday, compared to about LL37,000 on the parallel market) — a rate that would serve as a basis for calculating the budget.
This was the third Parliament session for the discussion of the 2022 budget. The first two were held on Sept 15 and Sept. 16.
As per the constitution, the budget should have been adopted by the end of 2021, or by the end of January 2022 at the latest, according to a specific procedure that had not been met in advance (the government presented the draft budget to Parliament on Oct. 15, 2021).
Will the budget come into effect?
According to the official National News Agency, the vote was held in the presence of 106 out of 128 MPs.
Sixty three MPs voted in favor of the text, while 37 opposed it and six abstained.
In order to be implemented, the budget law must now be ratified by a decree from the caretaker government, which resigned in the wake of the May 15 elections and no longer has full powers.
This means that the decree will have to be signed by the caretaker prime minister, caretaker Finance Minister Youssef Khalil, and President Michel Aoun.
While the signatures of the premier and finance minister do not seem to pose any challenge, this does not apply to Aoun, whose term expires on Oct. 31.
Despite this delay, the 2022 budget will still be applicable, if it comes into force, according to Paul Morcos, a lawyer and director of the law firm Justicia.
“Once in force, the budget will be considered applicable over the period between now and the end of 2022, but cannot be retroactive in accordance with the general principles that govern public finance,” he told L’Orient-Le Jour. “This is particularly true for amendments relating to compulsory levies.”
Morcos went on to explain, “This budget will also have a very limited impact on public finances (nine months of the year having already passed), especially since it is adopted in contravention of all the normal principles and deadlines.”
This story was originally published in French in L’Orient-Le Jour. Translation by Sahar Ghoussoub.