Lebanese 2020 budget passes despite concerns from civil society and protesters
Lawmakers in Beirut passed a budget Monday over the objections of protesters – who attempted to block access to the Parliament building – and a number of economists raised concerns that the measures laid out in the fiscal plan could worsen the country’s economic woes.
The budget vote took place as protesters and security forces scuffled outside the perimeter that had been set up around the Parliament building – concrete blast walls were hastily erected in recent days to keep demonstrators away from government buildings in downtown Beirut – and a number of protesters were arrested. Parliament approved the budget with 49 members supporting the plan, 13 in opposition and eight abstaining.
Legislators from the Future Movement party of former Prime Minister Saad Hariri, who joined the session at the last minute, providing a quorum for it to proceed, opposed or abstained from voting, according to Lebanon’s National News Agency.
Protesters objected to the adoption of a budget drafted by the previous government, which was ousted as a result of the mass demonstrations, with Hariri resigning on October 29. Some also questioned whether lawmakers could legally adopt the budget when the newly appointed Cabinet has yet to be confirmed.
Hariri’s replacement, Prime Minister Hassan Diab, said Monday that his government would not stand in the way of endorsement of the budget prepared by the former Cabinet, and would leave it to the Parliament to discuss and approve the bill.
“Constitutionally, it’s blurred,” said Jad Chaaban, an associate professor of economics at the American University of Beirut who has been supportive of the protests. “But ethically, politically, and also from a governmental perspective, how can you vote [on] a 2020 budget that is basically binding to the new government, knowing that this budget, first, has now many wrong estimations because inflation is now very high and growth figures definitely will plummet? And, second, how can you tie the hands of the new government when you’re saying this government will go out and implement reforms?”
The budget projects a government deficit equal to about 7 percent of GDP. In an analysis issued ahead of the budget vote, Kulluna Irada, an NGO pushing for political reforms, noted that the projected deficit for 2020 is 4.8 trillion Lebanese lira compared to 6.8 trillion in the 2019 budget and about 7.3 trillion in reality for 2019, but argued that the projected “cuts in spending are nor credible, nor sustainable.”
The group added that the projected deficit reduction, which is largely based upon a “gentleman’s agreement” with the Lebanon’s central bank, Banque du Liban (BDL), to waive the interest on government debt, is a continuation of the past practice of using “monetary policy to cover for fiscal spending, and transfer the government’s deficit to BDL, has led the country to its current financial position and has depleted BDL’s foreign exchange reserves down to alarmingly low levels.”
The budget “relies on a significant and artificial reduction of the cost of servicing the local debt, without dealing with the stock of debt,” the group wrote. “We are worried that such temporary solutions would only postpone the inevitable while increasing the cost on society through inflation and the devaluation of the lira.”
The lira, officially pegged to the dollar at 1,507 lira to the dollar, has been undergoing de facto inflation in recent months, with the exchange rate on the street rising to more than 2,000 lira to the dollar.
Ibrahim Kanaan, chair of finance and budget parliamentary commission, acknowledged during the session that revenue projections might not be accurate but said that passing the budget is a necessary first step toward getting the country out of its fiscal crisis, but that “our work is not enough unless it is followed by an urgent plan to get out of the crisis and reach safety.”
“Lebanon today is at a critical juncture in terms of the financial situation as a whole,” he said. “It requires everyone to completely remove this file from the circle of political tensions… we are in a structural financial crisis, and we have to admit it first and work hard to address it second.”