Lebanon Eyes Austerity Package To Slash Deficit Business

Lebanon Eyes Austerity Package To Slash Deficit Business
Lebanon's Prime Minister Saad Hariri

Lebanon is set to impose austerity measures to combat itsbulging fiscal deficit, Prime Minister Saad Hariri said Wednesday, warning ofan economic "catastrophe" if public spending keeps rising.

"As a government, we are required to issue the mostaustere budget in Lebanon's history because our financial position doesn'tallow us to increase spending," Hariri told reporters after a session ofparliament.

"If we continue like this we will reach acatastrophe," he said, one-year after his government committed to slashingpublic spending in order to unlock billions in aid pledged by internationaldonors.

Hariri did not specify what measures his government wasmulling but hinted the package may include wage cuts for soldiers.

"The soldier is prepared to pay with his blood for hiscountry," he said, noting that Lebanon now requires"sacrifices".

Lebanon is one of the world's most indebted countries, withpublic debt estimated at 141 percent of gross domestic product in 2018,according to credit ratings agency Moody's.

The budget for 2019 has yet to be finalised, but publicsector workers fear that austerity measures may mean cuts to their salaries.

Hundreds of civil servants protested in central Beirut onWednesday to denounce any such move.

The demonstrations came as part of a nationwide publicsector strike that affected schools, universities, state-run media outlets andthe tourism ministry's offices.

Lebanese Foreign Minister Gebran Bassil on Saturday proposedto reduce public sector wages, warning that "there will be no salaries foranyone" otherwise.

On Wednesday, Bassil said the proposed cuts "would betemporary and would not effect low wage employees".

Lebanon's economy has looked on the brink of collapse forsome time but a Paris conference dubbed CEDRE last April made aid pledges worth$11 billion.

At the Paris conference, Lebanon committed to reformsincluding slashing public spending and overhauling the electricity sector.

In exchange, the international community has pledged majoraid and loans, mostly for infrastructure projects that need to be signed off bythe new government.

As part of its commitments to CEDRE, parliament on Wednesdayapproved a plan to reform Lebanon's ailing electricity sector, one week afterit passed in cabine

The plan would improve power supplies, raise electricitytariffs and reduce the fiscal deficit resulting from government transfers tostate-run Electricite du Liban (EDL).

According to the World Bank, government transfers to EDLaveraged 3.8 percent of GDP from 2008 to 2017, amounting to about half ofLebanon's fiscal deficit.

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