Lebanese MPs debate 2020 budget as protesters throw stones at police
Central bank reassures foreign investors about deposits
BEIRUT: Projected revenues in Lebanon’s 2020 budget may be unrealistic because of a contraction in the country’s economy, the chairman of the parliamentary budget committee said yesterday, as protesters hurled rocks at police near to where the draft law was under debate.
Lebanon is in the throes of a financial and economic crisis caused by decades of bad governance and state corruption twinned with a liquidity crunch that has led banks to impose informal capital controls and the currency to slump. Parliament was debating a budget first drafted by the Saad Al-Hariri-led government that quit in October in the face of protests against the political elite blamed for the crisis.
Prime Minister Hassan Diab Hassan, whose government took office last week with backing from the powerful Hezbollah group and its political allies, told parliament he would not obstruct passage of the budget prepared by his predecessor.
Finance and budget committee chairman Ibrahim Kanaan told Reuters on Friday the latest projection was for a budget with a deficit of 7 percent instead of the originally hoped-for 0.6 percent, reflecting the crisis. But speaking at the start of the debate, Kanaan cast doubt on the numbers, saying “the reviewed revenues might not be realistic ... in light of the economic contraction”.
Kanaan also said interest rates should be cut or the state revenues would not be able to cover debt servicing, adding that he had heard rates would be cut “and we are waiting for the full commitment”.
“We cannot continue to adopt the policy of high interest rates with the aim of attracting bank deposits,” said Kanaan, a member of the influential Free Patriotic Movement.
A large part of the projected 2020 deficit reduction was thanks to interest relief on government debt held by the central bank. Kanaan told Reuters last week the central bank was still committed to this agreement. Some parties boycotted the session, with critics arguing that the Diab government should have presented its policy statement, won a vote of confidence in parliament and then presented the budget itself.
Some protesters have rejected the new cabinet and accuse the political elite of ignoring demands that include an independent government and fighting corruption.
Bank deposits Lebanon’s central bank said there would be no “haircut” on deposits at banks due to the country’s financial crisis, responding to concerns voiced by a prominent Arab billionaire about risks to foreign investments there. Emirati businessman Khalaf Ahmad Al-Habtoor, founder of the Al-Habtoor Group that has two hotels in Beirut, posted a video of himself on his official Twitter account asking Lebanon’s central bank governor if there was any risk to dollar deposits of foreign investors and whether there could be any such haircut. “The declared policy of the Central Bank of Lebanon is not to bankrupt any bank thus preserving the depositors. Also the law in Lebanon doesn’t allow haircut,” the Banque Du Liban (BDL) said in a Twitter post addressed to Habtoor, from Governor Riad Salameh. “BDL is providing the liquidity needed by banks in both Lebanese pound and dollars, but under one condition that the dollars lent by BDL won’t be transferred abroad.” — Reuters