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Siniora: We must cut EDL deficit

  • File - Former Prime Minister Fouad Siniora. (The Daily Star/Mohammed Azakir)

BEIRUT: Former Prime Minister Fouad Siniora warned of grave consequences if Parliament passed the salary scale proposal without modifications, calling on authorities to cut waste at Electricite du Liban and other state institutions.

Addressing Parliament Tuesday, Siniora said he favored raising the value-added tax from 10 percent to 12 percent and increasing the working hours of government employees.

“We should make big cuts in the salary scale proposals and refuse the call for retroactive payments of the wage increases. This salary scale should be paid over the next three years instead of in one shot,” Siniora argued.

He even proposed cutting the wages of judges and Lebanese University professors who received a raise in 2011 without the government carrying out a decent study into the impact of the wage hike on the state’s finances and economy.

“We should also find proper revenues that will not cause a recession or high inflation. We can raise the VAT to 12 percent at least, but we can exempt some vital products from these taxes,” Siniora said.

He repeated his call to reduce the deficit at EDL, which costs the state more than $2 billion a year.

Siniora called for modest increases in electricity tariffs.

“If we apply these measures, then this will contribute to electricity conservation,” he said. “EDL’s deficit over the past years amounts to 40 percent of the total public debt.”

Siniora said that EDL’s problems would continue as long as most of the power plants relied on fuel oil, emphasizing the importance of switching to natural gas to cut the energy bill.

The former prime minister also raised the issue of the working hours of government employees.

“The public staff works 32 hours a week, and this average is far lower than most countries around the world. We need to increase the working hours to improve production and performance.”

Siniora pointed out that the GDP growth dropped to 1 percent during the past three years, from around 8.5 percent in 2007-11.

“The budget deficit exceeded a record figure of LL6.3 trillion [$4.2 billion] in 2013, which puts the financial and monetary stability in danger and places further burden on the coming generations,” he said.

He stressed that the primary deficit now amounted to LL370 billion, compared with a surplus that had been witnessed from the years 2002-2011.

“The balance of payments has also witnessed a major shift from surplus to a continuous deficit of $1 billion yearly, while foreign direct investments dropped to less than $4 billion yearly after it had reached $8 billion in the years 2007-2010 for three consecutive years,” the MP said.

He noted that the public debt had reached $64 billion with a debt-to-GDP ratio of 140 percent by the end of 2013, after it had dropped from 180 percent in 2007-2010 to 134 percent in 2011.

Lebanon is now incapable of investing in its infrastructure, which is a prerequisite for achieving a minimum level of economic growth and development in certain areas. “

He warned that the treasury would come under increasing pressure when many of the public employees reach the retirement age.

“The number of beneficiaries from the retirement salary increased to 117,000 Lebanese retirees from only 25,000 in early 1990s,” Siniora said.

He cautioned that implementing the salary hike in its present form might induce the Finance Ministry to raise the interest rates on bonds and eurobonds to finance the wage hike, and said that this would ultimately cause the budget deficit to rise.

 
A version of this article appeared in the print edition of The Daily Star on April 17, 2014, on page 5.
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Summary

Former Prime Minister Fouad Siniora warned of grave consequences if Parliament passed the salary scale proposal without modifications, calling on authorities to cut waste at Electricite du Liban and other state institutions.

Addressing Parliament Tuesday, Siniora said he favored raising the value-added tax from 10 percent to 12 percent and increasing the working hours of government employees.

Siniora called for modest increases in electricity tariffs.

Siniora said that EDL's problems would continue as long as most of the power plants relied on fuel oil, emphasizing the importance of switching to natural gas to cut the energy bill.

Siniora pointed out that the GDP growth dropped to 1 percent during the past three years, from around 8.5 percent in 2007-11 .


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