Lebanese budget hopes to avoid economic crisis

Lebanese budget hopes to avoid economic crisis
Saad Hariri

The heavily indebted Lebanese government approved a draft budget to cut its large deficit on Friday, aiming to ward off a financial crisis which top leaders have warned is bearing down on the country unless it carries out reforms.

The draft 2019budget, which will cut the deficit to 7.5% of GDP from 11.5% in 2018, is seenas a critical test of the government's will to launch reforms that have beenput off for years by a state riddled with corruption and waste.

Lebanon's bloatedpublic sector is its biggest expense, followed by the cost of servicing apublic debt equal to some 150% of GDP, one of the world's heaviest debtburdens.

The budget couldhelp unlock some $11 billion in financing pledged at a Paris donors' conferencelast year for infrastructure investment, if it wins the approval of donorcountries and institutions.

"Now, praiseGod, we are done. The budget is complete," Information Minister JamalJarrah said after a cabinet session.

One more meeting toseal the process will be held at the presidential palace before the draft isreferred to parliament for approval. Ministers did not say when the nextsession would take place.

Fears the budget would lead to cuts to state salaries, pensions or benefits triggered weeks of strikes and protests by public sector workers and military veterans.

Measures to rein in the public sector wage bill include a three-year freeze in all types of state hiring and a cap on extra-salary bonuses. State pension will also be taxed.

However, atemporary public sector salary cut mooted by some early in the process was notincluded.

A big chunk of thedeficit cut stems from tax increases including a 2% import tax and a hike intax on interest payments. The government also plans to cut some $660 millionfrom the debt servicing bill by issuing treasury bonds at 1% interest rate tothe Lebanese banking sector.

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