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Austerity grabs headlines; deeper reforms afoot in budget

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BEIRUT: All eyes will be focused on Parliament next week when - seven months late - it examines the 2019 austerity budget, which looks to slash state spending and raise revenues. The occasion promises spectacle.

Inside the chamber, disgruntled MPs are expected to give impassioned speeches, objecting to various measures they deem too austere - or not austere enough - as veterans amass outside to protest cuts to their pensions. There will be plenty of news coverage.

But as important as the debate over austerity is - some $11 billion in international funding hinges on it, as do the livelihoods of many state employees and a slew of public services - more radical changes are also taking place.

Away from cameras, several fundamental issues will be decided that could put an end to official Lebanon’s devil-may-care attitude toward corruption in public spending. The issues are deeper reforms woven into this year’s budget by Parliament’s Finance and Budget Committee, said its chair, MP Ibrahim Kanaan.

For years, Lebanon’s Cabinet has been allowed to move funds from one budget line to another with little or no oversight. If the committee gets its way, that will no longer happen, Kanaan said.

“We don’t want to give the government ... the possibility of moving [money] even from the reserve funds without substantiating this move,” he told The Daily Star. “Because sometimes it’s done politically” as part of a deal, he added.

“When the government is authorized by Parliament to execute a budget, the government should respect this authorization,” he said. “If any changes occur, they should ... come back to Parliament.”

The move is one broadside by the MPs, led by Kanaan, to claw back power from the far more powerful ministers. It is unclear whether the proposal will be endorsed by the full Parliament, which includes sitting ministers and many members dependent on party bosses for their seat.

Another move has successfully been blocked before, Kanaan said. “Since 2010, the Finance Committee has pursued scrutiny for donations and loans” to the state from abroad, he said. “We were not successful ... because there were always counterarguments from the government that it will [harm] our bureaucracy.”

The argument, he said, is that going through the Court of Audit for every donation from the international community would slow things down to the point where Lebanon misses out on money and opportunities.

Under the current system, many donations are channeled to bodies such as the Council for Development and Reconstruction - with little oversight from anyone.

But “this time, we did it. It’s huge,” he said. “We included all public institutions in Lebanon. Anywhere you have public funds, there should be oversight.”

That principle also applies to the odd trio of the National Lottery, the Directorate-General of Cereals and Sugar beets and state telecoms operations including Ogero.

Bizarrely, these three state enterprises are not a part of the regular budget, but occupy separate “budget annexes.”

“I never understood why,” Kanaan said. While the 2019 budget keeps them separate, the committee inserted a clause requiring them to be integrated into the Finance Ministry’s regular accounts, and therefore be a part of the regular 2020 budget.

“The revenues, the profits - they will be transferred directly to the Treasury account, which is very good, because we’ll know what’s happening,” he said. This is especially important in the case of telecoms, which provided a 10th of last year’s revenues to the state.

Finally, the committee has restricted the issuance of debt to closing the budget deficit. “In the past this was a bit of a blank authorization whereby [Cabinet] could use it for many other things,” Kanaan said. If Parliament keeps these quiet reforms, it could prove a watershed moment.


“It’s very new, it’s very tough, very aggressive reforms, which are structural reforms,” Kanaan said. “They’re not only reforms for this year. We’re talking about ... a trend for the future.”

In addition to introducing these measures, the committee took its red pen to line items in the budget. Kanaan specifically called attention to the slashing of unauthorized personnel costs connected to an illegal hiring scandal.

The Metn MP led the investigation into the scandal, which in May uncovered that some 37,000 state workers had been hired illegally. About 5,000 of those hires had taken place during an employment freeze that began in August 2017.

“We scrutinized the ministries and administrations’ [budgets], and when we discovered ... violations of Law 46, which forbids any new recruitment, we canceled the allocated funds,” he said, “which is something that has been done for the first time.”

Kanaan’s investigation into illegal hiring has been passed on to the Court of Audit.

Close scrutiny of the budget allowed the committee to reduce spending even further than the Cabinet did. After the panel finished its work Tuesday night, Kanaan announced that the budget deficit would be brought down to 6.59 percent of GDP - a full percentage point lower than would have resulted from Cabinet’s draft.

The cuts apparently surprised the ministers, who summoned Kanaan to a meeting Thursday night. They were “maybe concerned positively sometimes, and not very positively other times, about what we did,” Kanaan said. “So I accepted the invitation ... and I explained what the committee did.”

Noting that the ministers had asked the committee not to let the deficit exceed 7.59 percent of the GDP, Kanaan said he told them, “We went lower. So why are you still concerned? You should be happy.”

Even so, some quarters are still not happy with the scale of the cuts. Thursday, Lebanese Forces leader Samir Geagea criticized the budget as not doing enough to rein in spending. The LF is the main Christian rival of the Free Patriotic Movement, which Kanaan belongs to.

“I’m surprised,” Kanaan said. “I don’t know if he consulted with his members of Parliament,” whom the committee chair praises. “They acted very positively” during the committee’s budget hearings, he said.

“It’s very easy to sit far from the hot seat and assess and declare things.”

Given the scale of the committee’s cuts, another question arises: Are they real?

On paper, the 2018 budget also slashed the deficit. But in reality, the deficit erupted to 11 percent of GDP - far higher than was forecasted.

What’s different this time? “The government is eager to actually cut public expenditures,” Kanaan said. “There is very clearly an intention to reduce the deficit.”

And on Parliament’s side, “we’ve never been more aggressive.”

Still, Kanaan said he cannot divine what will happen next week

“It’s democracy, anyone can say whatever they want ... Even if they make a fuss about it, and portray themselves as heroes of the people and of the nation and of whatever they want, at the end of the day we would like to preserve our country, to preserve our people, to keep our youth from leaving the country,” he said.

“I believe that any responsible person should back these reforms. Because what is the alternative?”

Daily Star
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