Finance Minister Mohammed Shatah revised Lebanon’s projected GDP growth for 2009 to 3 percent from 5 percent in light of the global financial crisis and the expected economic slowdown in the oil-rich Gulf Arab states. The minister also projected inflation to reach 5 percent this year.
Lebanon counts heavily on the remittances of Lebanese expatriates to shore up the economy, which was badly battered by a series of security incidents and political turbulence since the assassination of former Prime Minister Rafik Hariri in February 2005 and a devastating war with Israel during the summer of 2006. The World Bank estimated capital inflows to Lebanon in 2008 at $6 billion. But experts fear that the remittances will fall once Lebanese working in the Gulf States are laid off, pack their belongings and return home.
“These projections were also based on an oil price of $54 a barrel,” Shatah said. The minister also cautioned that if Lebanon failed to privatize the country’s two cellular networks by the third quarter of this year, the cost of debt servicing would rise by LL676 billion ($450 million). The chances of selling the lucrative telecom sector in Lebanon are getting dimmer as most economies in the world suffer a severe shortage of liquidity. Meanwhile, the director general of the Finance Ministry said financial reforms in Lebanon take a long time due to the reconciliatory structure and nature of the Lebanese system, Friday. “The first problem facing the preparation of the budget is the inability of the (political) composition in Lebanon to take major decisions which impacts directly on the budget,” Alan Bifani said. Bifani was alluding to the delay in endorsing the 2009 draft budget as a result of the sharp political bickering between members of cabinet. These remarks have been echoed by some economists and observers that politicians are hindering reforms with their occasional interventions in the state’s affair. There is a general feeling that the draft budget will not be approved by the cabinet before the parliamentary elections in June 7. Bifani suggested that this indecisiveness has left the successive budgets with no major changes in the numbers (i.e. revenues and expenditures).
The last budget which was approved by the cabinet and the parliament was the 2004 budget. Bifani also added that all these factors have led to higher spending in the budget. He added that this situation also came at the expense of social spending and investments that can generate growth and jobs in the market. Bifani said that one of the causes of the budget deficit is the allocations of funds to the councils and funds, adding that all this money is spent outside the budget. Critics say that that the councils and funds such as the Council for Development and Reconstruction, Council of the South, the Higher Relief Council and the Council of the Displaced have been draining the resources of the governments. They added that there is no proper supervision on these funds to determine where the money is going. Some officials have proposed the creation of a planning ministry and that all these funds would operate under the umbrella of this ministry. Bifani said that the Finance Ministry does not have the veto power in the budget which can bloc any requests for spending. He added that this political composition does not accept the idea of a “super” finance ministry which should have more powers, especially when it comes to the budget. Bifani said that there should be a revision of the entire salary scale of the public sectors. The senior official also commented on the number of employees under the government payroll. He added that there are 124,000 employees working the public sector, 23 percent of them in the army, 20 percent in the security forces, and 13 percent in the ministry of education, 17 percent in the public administrations and 13 percent in other institutions. These employees cost the treasury 33.5 percent of the budget. But Bifani stressed that the problem is not the size of the public sector but rather productivity.
