BEIRUT: Infuriated political parties and trade unions have called on authorities to look for other means of reducing the budget deficit after Foreign Minister Gebran Bassil’s proposal to cut the salaries of ministers, MPs and civil servants. Bassil said in a tweet posted over the weekend that if a temporary reduction of these salaries did not occur, then no money would be left for anyone else.
“I am telling people that they should not look at their pockets only as this step [salary cuts] will be a small part of the cuts carried out by the state and if the reductions should start from the ministers and MPs, then let it be so,” Bassil added.
The tweet prompted retired military personnel to call for sit-ins and protests across the country to prevent any attempt by the government to reduce end-of-service benefits for retired government employees and Lebanese Army officers.
A statement by the retired officers said they would block roads in Beirut and other parts of the country to press the government to drop any plan to touch the salaries and benefits of retirees.
Hezbollah MP Hasan Fadlallah warned in a speech Monday that no one should touch the pockets of the poor and the needy.
He said the government should focus on cutting waste and combating rampant corruption in state institutions instead of cutting the wages of civil servants and Army personnel.
This view was also echoed by MP Chamel Roukoz, who belongs to Strong Lebanon Parliamentary bloc, headed by Bassil.
Roukoz, a former Army general, said the military was not responsible for the deficit and waste. He said the authorities could obtain the money from other sectors.
Prime Minister Saad Hariri’s government has pledged to implement radical reforms in a bid to reduce the mounting budget deficit, which reached almost 11 percent of gross domestic product in 2018. Hariri has repeatedly said that some of reforms might be painful and unpopular.
The government is coming under increasing pressure from the World Bank and the international community to cut the deficit and implement clear-cut reforms before receiving any money from last year’s CEDRE conference in Paris.
A senior World Bank official told The Daily Star last month that Lebanon would not receive any money if reforms were not implemented.
World Bank Vice President for the Middle East and North Africa Ferid Belhaj said that if Lebanon wanted to see any CEDRE money soon, it needed to get serious about implementing reforms.
“If it [the government] fails to do so, the amount will be zero - let me be very clear about that. Zero,” he emphasized.
“This is something that every single decision-maker in Lebanon will know. CEDRE is a contract; they have reforms that can be financed. If you don’t get reforms, there will be no financing,” he added.
Lebanon is in dire need of the $11.6 billion in soft loans from the donor countries to rehabilitate its aging infrastructure.
But in order to attract these funds, the government needs to show unwavering determination to cut the deficit by at least 1 percent each year.
Bassil met Sunday night with Hariri, Finance Minister Ali Hasan Khalil and representatives from Hezbollah and the Lebanese Forces to discuss measures to reduce the budget deficit in 2019. No statement was issued after the meeting.
Khalil submitted the 2019 draft budget to Hariri last week.
Details of the budget were not sent to ministers or MPs.
Economist Ghazi Wazni told The Daily Star that Hariri and Khalil were still considering adding more clauses to the budget to ensure the state could slash the deficit even further that the set target of 1 percent each year.
“To my knowledge, the issue of cutting the wages of the public sector was raised by Hariri, Khalil and Bassil in the meeting. The idea was to cut the wages across the board by 15 percent. But the proposal was revised and the officials suggested that the cuts will only affect officials who make an income of LL3 million [$2,000] a month,” Wazni said. He added that the issue was not confined to the salaries and wages of the civil servants and military personnel.
“This proposal is part of a general plan to reform the public sector in Lebanon,” Wazni said.
But he agreed that cutting the wages of civil servants and Army personnel might not be feasible at the moment due to the difficult conditions in the country.
Wazni said there was an idea floating around that the Lebanese commercial banks could issue Treasury bills and Eurobonds with zero percent interest with a three-year maturity.
“Hariri and other officials wanted to raise this idea with the commercial banks in the presence of Central Bank Gov. Riad Salameh.
“The idea was to issue $10 billion in bonds with zero percent interest. But I suggested that banks should issue $6 billion in bonds with zero percent interest,” Wazni said.
“This will help the Finance Ministry to reduce the deficit significantly. Of course, this is only part of several measures to cut the deficit.”
He called on the government to freeze all hiring and to dismiss the 11,000 workers who were employed last year despite a hiring freeze.
“The government should also suspend for three years any salary increase for all civil servants and military personnel,” Wazni said.
But financial expert Joe Sarrouh did not favor the idea of asking banks to issue zero percent bonds at the moment.
“The government needs to improve tax collection, reduce waste and implement the electricity plan before asking the Lebanese commercial banks to subscribe to bonds with zero percent.
“We need to see real measures from the government before asking other sectors for help,” Sarrouh said.