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Lebanese Cabinet addresses public financing

From left, Ministers Ali Hasan Khalil, Arthur Nazarian and Akram Chehayeb attend a Cabinet session in Baabda, Friday, May 9, 2014. (The Daily Star/Mohammad Azakir)

BEIRUT: Lebanon’s public finances dominated Thursday’s Cabinet session, with Finance Minister Ali Hasan Khalil addressing outstanding issues, including a draft law to issue eurobonds as well as the controversial salary scale issue.

Ministers arrived around 9:30 p.m. to the Grand Serail, where Prime Minister Tammam Salam chaired an extraordinary session designed to discuss the “financial situation in the country,” a ministerial source said.

After convening the session, Salam spoke about the “worrying situation in the country particularly in terms of security,” which he said the government was closely following.

According to Information Minister Ramzi Joreige, who spoke to reporters after the end of the 90-minute session, Salam said Thursday's Cabinet session would address security developments.

A ministerial source told The Daily Star that the next session would discuss the situation in the border town of Arsal and ongoing contacts to secure the release of the remaining soldiers and policemen being held by ISIS and Nusra Front as well as the security situation in the country.

During the session, Khalil presented an overview of growth rates, annual revenues, public debt and interest rates, as well as public sector salaries.

Khalil spoke about the absence of an approved state budget since 2005 and presented the ministers with a table of revenues, which have remained flat for the past four years.

He also showed them the increase in state deficit, which he said was the result of an increase in expenditures. Khalil proposed means to cover the deficit, including issuing eurobonds

“We reviewed the challenges ahead, among them is the absence of legislative work because they are related to issuing eurobonds and other matters related to revenues and needed measures that have not been taken since 2005,” Khalil said after the end of the session.

“We discussed the reality of the financial situation starting from the size of the public debt, revenues and expenditures particularly that expenditures have increased in an alarming rate vis-à-vis flat revenues in the past four years which is what we explained in detail,” he said.

He also said that the ministers discussed the public sector wage hike draft law, reiterating that a proposal should find a balance between revenues and expenditures.

Minister of State Nabil de Freij said he disagreed with Khalil on means to finance the wage hike.

“If what he said were true, we would have agreed to it in the beginning. We think that the draft law requires further study so that it will not affect the public debt, which is in principle very large,” he said.

“This needs more discussion and we might reach a conclusion.”

He said that Salam would schedule another Cabinet session to continue discussion on the financial situation.

Khalil has opposed measures to pay the wage hike via installments over a period of three years, as proposed by the Future Movement and de Freij. Lawmakers have not yet agreed to a formula that would a balance revenues and spending given that the public sector salary rise is expected to cost some $1.2 billion a year.

Along with the draft law to issue eurobonds at low interest rates to finance the public debt and cover state expenditures, Khalil requested a bill to allow extra-budgetary spending.

Khalil is seeking to legalize his ministry’s extra-budgetary spending via a Cabinet draft law that would be later approved by Parliament. But the March 14 coalition is demanding that the government retroactively approve $11 billion of extra-budgetary expenditures by the government of Fouad Siniora between 2006 and 2009.

“Issuing the eurobonds requires Parliament’s approval, but the draft of the extra-budgetary spending should include all previous spending by governments since 2005 to this date,” de Freij said before the Cabinet session.

“We should legalize spending for governments under [former] prime ministers Najib Mikati, Saad Hariri and Fouad Siniora but the other coalition is saying that such a draft law would take time.”

He said the Cabinet was still waiting for the Finance Parliamentary Committee headed by MP Ibrahim Kanaan to finalize calculations and the amount spent by previous governments.

“But he has not yet finished, why is that?" he asked. "Unfortunately, politics is meddling in the economy.”

 

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Summary

Lebanon's public finances dominated Thursday's Cabinet session, with Finance Minister Ali Hasan Khalil addressing outstanding issues, including a draft law to issue eurobonds as well as the controversial salary scale issue.

Ministers arrived around 9:30 p.m. to the Grand Serail, where Prime Minister Tammam Salam chaired an extraordinary session designed to discuss the "financial situation in the country," a ministerial source said.

According to Information Minister Ramzi Joreige, who spoke to reporters after the end of the 90-minute session, Salam said Thursday's Cabinet session would address security developments.

Along with the draft law to issue eurobonds at low interest rates to finance the public debt and cover state expenditures, Khalil requested a bill to allow extra-budgetary spending.

Khalil is seeking to legalize his ministry's extra-budgetary spending via a Cabinet draft law that would be later approved by Parliament. But the March 14 coalition is demanding that the government retroactively approve $11 billion of extra-budgetary expenditures by the government of Fouad Siniora between 2006 and 2009 .


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