Lebanese cabinet approves budget changes

17 January 2003
Wrangling over the Lebanese budget continued on 16 January, as various amendments by the finance committee, approved by the cabinet, raised the overall projected deficit by£Leb 55,000 million ($36.5 million). The budget aims at a cut in the deficit to 30-35 per cent of gross domestic product (GDP) from about 40 per cent in 2002. Some of the most controversial measures had to be axed in the face of determined opposition in parliament and on the streets. Changes in benefits for teachers and state employees were scrapped, as was a plan to lengthen the working week and to tax pensions. To make up for some of the loss in revenue, the latest cabinet meeting passed a 5 per cent tax on bank deposits and a reduction in the budget of the Council for Development & Reconstruction. The revised budget will now be put to parliament for ratification.

Prime Minister Rafiq Hariri first presented his stringent 2003 budget in August, aimed at showing his commitment to tackling the country's crippling debt problems ahead of the Paris II donors' conference in November, at which he successfully secured $4,400 million in concessionary loans. Some of the pledges have already been fulfilled: Oman and Malaysia have sent a total of $350 million, while the UAE sent $300 million on 15 January and the same amount is due from Kuwait in the near future. Further positive economic news came in a 15 January Banque du Liban (central bank) report showing that the balance of payments (BoP) recorded a $1,500 million surplus in 2002 compared with a $1,170 million deficit in 2001, with a particularly strong performance in December. 'The balance of payments surplus in December can be attributed to the strong capital inflow resulting from the success of the Paris II summit and Malaysia's transfer of its $300 million share,' the bank said in a statement. Lebanon first moved into (BoP) surplus in May after the successful sale of $1,000 million in Eurobonds (MEED 15:3:02).

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