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Wage hike, new hires widen 2014 deficit

  • Minister Ali Hasan Khalil speaks during a press conference in Beirut, Friday, June 6, 2014. (The Daily Star/Mohammad Azakir)

BEIRUT: Lebanon will post a deficit of 10.71 percent of GDP and 34.9 percent of spending in 2014, according to figures in the draft budget released Friday by the Finance Ministry based on a projected 2 percent growth in GDP.

The deficit was estimated at $5.1 billion in 2014 and current expenditures were projected at $13.1 billion, a 4 percent increase compared to an estimated $12.7 billion in current expenditures in the 2013 draft budget, Finance Minister Ali Hasan Khalil told a news conference.

Actual current expenditures in 2013, however, amounted to around $12 billion, putting the increase in projected current expenditures in 2014 at 9.1 percent.

The projected increase is mainly due to a cost-of-living wage hike and an increase in the number of public sector employees, Khalil said. The 2014 draft budget, which was submitted by the end of May to the Cabinet for discussion, could be amended to cut expenditures, he added.

Total expenditures in 2014 were estimated at $14.6 billion without taking into consideration any increase if a new salary scale is passed, compared to $13.7 billion in 2013.

Parliamentary blocs have yet to reach an agreement over a proposed salary scale for civil servants before Tuesday when Speaker Nabih Berri called on Parliament to convene to debate the controversial draft bill.

“All lawmakers should attend Tuesday’s session and discussions could take place in Parliament to reach a consensus,” Khalil said.

Lawmakers are deeply divided on ways to fund the salary scale, with proposed hikes in taxes such as the VAT being rejected by the Union Coordination Committee, a body representing public sector employees and private school teachers.

Bodies representing the private sector have also argued against paying the wage hike in full, fearing that it would fuel inflation and increase the burden on the treasury, suggesting that the salary increase should be reduced and paid in installments.

Funds allocated to Electricite du Liban will amount to around $2 billion or LL3.056 trillion, the same amount channeled to EDL in 2013, Khalil said, denying media reports that claimed only LL2.5 trillion had been allocated for EDL in the 2014 draft budget.

In the 2013 draft budget, the Finance Ministry allocated LL2.86 trillion ($1.9 billion) for EDL but ended up channeling LL3.056 trillion.

Khalil said Cabinet had tasked the energy minister with drafting a comprehensive plan to reform the electricity sector and to reassess production costs and tariffs.

But Khalil stressed his ministry would reject any hike in tariffs that could target low-income households.

The cost of public debt servicing was estimated at $3.92 billion, compared to $3.8 billion in 2013.

Lebanon, which has a public debt of $65 billion, has been posting a primary budget deficit – excluding debt and interest repayment – since 2012 compared to five years of primary surplus stretching from 2007 to 2011.

Revenues in the 2014 draft budget were projected at $9.5 billion compared to a collected $9.4 billion in revenues in 2013.

Tax revenues were projected at $7.2 billion in 2014 while other revenues were estimated at $2.2 billion.

 
A version of this article appeared in the print edition of The Daily Star on June 07, 2014, on page 4.
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Summary

The deficit was estimated at $5.1 billion in 2014 and current expenditures were projected at $13.1 billion, a 4 percent increase compared to an estimated $12.7 billion in current expenditures in the 2013 draft budget, Finance Minister Ali Hasan Khalil told a news conference.

Actual current expenditures in 2013, however, amounted to around $12 billion, putting the increase in projected current expenditures in 2014 at 9.1 percent.

The projected increase is mainly due to a cost-of-living wage hike and an increase in the number of public sector employees, Khalil said.

Revenues in the 2014 draft budget were projected at $9.5 billion compared to a collected $9.4 billion in revenues in 2013 .


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