BEIRUT: Lebanese banks will stop purchasing treasury bills if the government fails to reduce the deficit, a leading banker said Saturday, urging the Cabinet to slash waste across heavily budgeted ministries.

“We will stop funding the deficit and financing government-run projects unless decisive reform measures are taken to bring to a halt any increase in public deficit [resulting from] squandering in various ministries including the Energy [Ministry], Education [Ministry] and the Health [Ministry],” Francois Bassil, chairman of Byblos Bank told the Central News Agency.

But Bassil denied earlier media reports that Prime Minister Najib Mikati had asked banks during a recent meeting with members of the Banks Association to step up purchasing T-Bonds to cover the 2012 budget deficit. Media reports said Mikati urged banks to cover a LL700 billion increase in spending as a result of the recent wage increase.

Employees across the private and public sectors are expected to receive a wage increase ranging from LL175,000 for those earning the minimum monthly wage to LL299,000 for salaries above LL1.5 million.

While the raise is effective from Feb. 1 for private sector employees, public employees would have to wait until Parliament passes a special law regarding the issue.

The budget deficit slipped to 18.76 percent as of November 2011 or LL2.94 trillion (less than $2 billion) from 27.83 percent, compared to LL4.312 trillion in the same period of 2010, the Finance Ministry said Tuesday.

The ministry added that the deficit in the first 11 months of 2011 shrunk by LL372 billion compared to the same period of 2010.

It attributed the drop in deficit to the rise in government revenues and most notably from the telecoms sector, which generated LL1.991 trillion.

Meanwhile, sources told the Central News Agency that banks rejected an article in the 2012 budget that places a 5-percent tax on profits made on T-Bonds.

Lebanese banks have been hit with falling interest rates as they renew treasury bills maturing in 2012 at a 2-percent lower yield, while the cost of deposits in Lebanese pounds remains the same.

Head of Banks Association Joseph Torbey said banks had bought since the 1990s more than $30 billion of Lebanese government-issued T-Bonds. He said that 44 percent of the amount was in foreign reserves.

Lebanon’s two largest banks Audi and BLOM reported this week a net profit of $365 million and $331.5 million respectively, with the first rising by 3.7 percent and the second by only 0.02 percent.

Also Byblos Bank said last Thursday that its net profits in 2012 rose by only 1.2 percent to $179.7 million compared to the same period of 2010. These results are somewhat disappointing when compared to last year, when profits grew at nearly two-digit levels.