BEIRUT, Sept. 27, 2022 (Xinhua) Two local economic experts confirmed that the general budget for 2022 approved by the Lebanese parliament yesterday (Monday), is not up to the level of reforms that would pave the way for an agreement with the International Monetary Fund.
The budget came with a deficit of 11 trillion Lebanese pounds (297 million dollars) and revenues of 30 trillion pounds (about 810 million dollars) and expenditures estimated at 41 trillion Lebanese pounds (about 1.2 billion dollars).
“The 2022 budget should have included reforms to avoid huge budget deficits, because printing more money is the only way to finance the deficit,” Patrick Mardini, head of the Lebanese Institute for Market Studies, told Xinhua.
He believed that “the budget is inflationary,” noting that “printing more money will lead to more inflation and more depreciation of the local currency.”
Mardini explained that the only way to finance Lebanon’s budget deficit today is by increasing the money supply, because Lebanon has defaulted on its “Eurobonds” and therefore lost its ability to access international financial markets at a time when the state cannot borrow from local banks in light of the crisis. current banking.
The economic expert and former editor-in-chief of the Kuwaiti newspaper (Al-Qabas), Mounir Younes, confirmed that the International Monetary Fund would prefer if the customs dollar used the exchange rate of the dollar on the “Exchange” platform of the Bank of Lebanon, which amounts to 29,800 Lebanese pounds, in the hope that it would become the actual local and international standard for the exchange rate. The US dollar against the lira.
“The International Monetary Fund had called for the unification of the multiple exchange rates, but officials in Lebanon see the approval of a high exchange rate for the customs dollar on imports as a move that will not be popular in Lebanon, which is heavily dependent on imports,” Younes told Xinhua. big”.
Yunus expressed his belief that the general budget should have approved a comprehensive reform of the tax system by imposing more taxes on high-income people while reducing the burden on low-income individuals, which did not happen in the 2022 budget.
The 2022 budget imposed a 10% tax on interest income from bank accounts, certificates of deposit and treasury bonds in Lebanese pounds, and raised the fees for issuing a passport for a period of 5 years from 300,000 to 1 million Lebanese pounds and from 500,000 to 2 million Lebanese pounds for a period of 10 years.
Yunus believed that one of the advantages of approving the budget is that it will help organize public finances, determine spending ceilings, improve the living conditions of workers in the public sector and the army, in addition to correcting the situation of state administrations during the preparation of a more comprehensive budget for 2023.
He praised the increase in the salaries of all public sector employees in the budget to no less than 5 million Lebanese pounds and no more than 12 million Lebanese pounds per month, and said that this should encourage public sector employees to stop their strike that has been going on for more than two months and improve the performance of public administrations.
Lebanon is facing an unprecedented financial crisis due to the lack of US currency reserves, which has led to the depreciation of the local currency by more than 90%. Meanwhile, the country uses at least 4 substantially different exchange rates through which the Lebanese pound is converted into US dollars.
Parliament’s approval of the general budget is among the conditions for reaching an agreement with the International Monetary Fund, an agreement that is seen as the first decisive step for Lebanon to begin to emerge from a financial crisis that has been going on for three years and has plunged 82% of the population into poverty, according to the United Nations.
And a “initial” agreement was signed between Lebanon and the International Monetary Fund at the staff level last April. The Lebanese authorities must increase revenues to finance the public sector, allow more social spending through customs duties, and unify the exchange rate of the local currency against the US dollar, but the budget approved by Parliament counts The customs dollar is at a price of 15,000 pounds, compared to the previous rate of 1,500 pounds to the dollar, while the exchange rate of the dollar in the parallel market is about 37,000 pounds.
The initial agreement between Lebanon and the IMF relates to financing of $3 billion to be disbursed over 4 years, according to a program that explains what Lebanon must do over the next four years with the aim of rebuilding the economy and restoring financial sustainability.
To sign the final agreement, the IMF requires taking a number of measures, including approving the 2022 budget and the “Capital Control” (capital control) draft law, in addition to passing legislation related to restructuring the banking sector and amending the law related to banking secrecy. /ts/