Saad Hariri was Prime Minister when Lebanon passed its first budget in 12 years in 2017. (Credit: National News Agency)
The Parliamentary sessions to vote on the 2024 budget law present an opportunity to look back at the 30-year chaos that prevailed over the management of public finances at the highest level of government.
A senior official at the Finance Ministry confirmed this perspective to L’Orient-Le Jour.
After the Civil War, since 1993, the Lebanese authorities resumed drafting and voting on state budgets, but almost never within the constitutional deadlines. The 2005 budget law, for instance, was adopted in 2006.
In the wake of the July 2006 war between Hezbollah and Israel, which was followed by decade long political tensions and security incidents partially linked to the 2011 Syria war the country was without a budget until 2017.
During this period, the state operated based on the provisional one-twelfth rule, which allows the Finance Ministry — under exceptional conditions — to continue to cover state expenditure in the absence of a budget, and during the first month of the year in which the budget should have been implemented.
In 2017, while Saad Hariri was prime minister, Parliament voted on the budget for that year after more than a nine month delay. During these months, the cabinet was still abusing the provisional one-twelfth rule to continue collecting taxes and financing its activities.
The budget for 2018 was rushed through in March 2018, just before the holding of the CEDRE conference at France’s initiative.
2019 — 2023
For the 2019 budget, the government waited until July, as the crisis entered into active mode. The budget for 2020 was voted on in January of the following year, and its content was completely outdated compared with the reality of the exchange rate, which had been falling for more than a year.
In 2021, no budget was adopted and the cabinet started again. It was not until September 2022 that the draft budget for that year was passed.
It came into force in November 2022, after President Michel Aoun had decided to send the text back for a second reading and, for the first time since the start of the crisis, began a process to bring the official exchange rate closer to that of the lira in the market.
In 2023, the cabinet did not send the draft budget to Parliament until September, a few weeks before sending the draft budget for 2024. The two drafts were merged by the Finance Committee and serve as the basis for the current budget.
Settlement laws
The situation is not better as far as the settlement laws are concerned, since successive cabinets over the last 30 years have virtually never respected the limits of the budgets that have been voted.
In simple terms, the settlement laws set out the final amount of state expenditure, revenue and the financial result at the end of the year, enabling Parliament to check that the cabinet remained within the limits set by the budget voted for the same year. They are naturally voted on at the end of the year, following a precise process.
From 1993 to 2003, settlement laws were passed, but with a delay (the 2003 law was passed in 2005) and with unrealistic figures. Moreover, the first article of these laws stated that the figures were to be revised in hindsight, once an audit had been carried out, which makes them completely useless.
In 2018, Alain Bifani, then director general of the Finance Ministry, and his team, presented all settlement drafts “adjusted to the nearest lira rate” for the 1997-2017 period, a task that was then continued for 2018 and 2019.
But the Court of Audit has not yet stamped its approval on these documents, and Parliament has still not voted on them. Bifani resigned in 2020 following the failure of the first round of talks between Lebanon and the International Monetary Fund, which should have led to the release of financial aid to help the country finance its way out of the crisis.
The senior civil servant had explained that he had presented a rescue plan to the cabinet, which was accepted by the IMF, only to be torpedoed by a section of the Lebanese ruling class opposed to the implementation of the reforms requested by the IMF.
Since 2020, the Finance Ministry has no longer produced the accounts that serve as the basis for the settlement laws. Its staff has been reduced by the depreciation of public sector salaries, which have still not been adjusted to the real level of the exchange rate.
This article was originally published in L'Orient-Le Jour.