Lebanon nod to most items in budget with deficit of 7.6 percent of GDP

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Lebanon’s cabinet on Monday agreed to most items in a draft 2019 state budget that it says will reduce the deficit to 7.6 percent of GDP in part by delaying retirement and limiting benefits for government employees.

“Remaining straightforward details will be dealt with this evening and entered tomorrow into the heart of the budget. I believe that tomorrow we will hold the last session. The numbers are finished and so are the legal issues,” Information Minister Jamal Jarrah said.

Finance Minister Ali Hassan Khalil said on Sunday the deficit would be 8.3 percent or less of gross domestic product (GDP). Last year it was higher than budgeted at between 10.5-11 percent of GDP and Lebanon has one of the world’s heaviest public debt burdens at around 150 percent of GDP.

However, government efforts to impose what Prime Minister Saad al-Hariri has said would be Lebanon’s most austere budget have been met with a string of protests and strikes by state workers.

On Monday, former soldiers worried about losing pensions or benefits burned tires outside the parliament building where the cabinet was meeting, and police used water cannons to drive them back.

The coalition cabinet has met almost daily this month to finalize a budget in an effort to get spending under control and rein in debt. President Michel Aoun has urged Lebanese to make sacrifices to rescue the country from the financial crisis.

A copy of the draft budget distributed by the Finance Ministry included delaying retirement with a full pension for most military ranks by five years.

It included limits on benefits paid to state employees so that they could not exceed 75 percent of the base salary and rules to stop a practice of government bodies paying staff 13th month of salary as a bonus.

Individuals would not in future be able to receive both a government pension and a government salary at the same time. All new hiring will be frozen for three years.

Khalil said on Saturday that the deficit reduction would include a saving of around 1 trillion Lebanese pounds ($663 million) in debt servicing costs.

He told Reuters the government aimed to reduce debt servicing costs by issuing treasury bonds at an interest rate of 1 percent.

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