May 23, 2019 / 3:46 PM / 2 months ago

UPDATE 2-Lebanon's leaders at odds over whether budget is finished

* Country faces huge debt pile after reforms delayed

* Cabinet split over pace of deficit reduction

* Finance Minister has declared budget complete

* Foreign Minister says more work needed

* Deputy PM says finances stabilised, urges reforms (Adds Hasbani comments, background)

BEIRUT, May 23 (Reuters) - Lebanon’s foreign minister said on Thursday more work was needed to bring down the deficit in the draft state budget, as other top officials warned against further delays to finalising the plan.

The government of Lebanon, which has one of the world’s heaviest public debt burdens, is vowing to enact reforms that have been put off for years. Top officials have warned of crisis unless action is taken in this budget.

But the cabinet once again missed a self-imposed budget deadline on Wednesday and scheduled a final session for Friday.

Prime Minister Saad al-Hariri’s administration groups nearly all of Lebanon’s rival parties. Measures approved so far have brought the deficit to 7.5% of GDP from some 11.2% in 2018, which the foreign minister argues is still too high.

After years of low economic growth, Lebanon has one of the highest debt-to-GDP ratios in the world at around 150% and foreign governments have been leaning on the country to enact reform.

There are also concerns over a slowdown in growth of deposits in the banking system, and the central bank’s net foreign assets fell to $37.3 billion on May 15 from $42.9 billion a year earlier.

Finance Minister Ali Hassan Khalil declared the budget complete at the start of the week. On Wednesday, he said that every day it was not passed there was “a cost to market confidence”.

But Foreign Minister Gebran Bassil insists more can be done and his comments at a televised news conference on Thursday indicated the row could drag on.

“What we will do in the coming days is continue our positive work. We want to complete the budget quickly and we must take bold decisions,” he said. The current deficit reduction was “not enough to solve the exceptional situation in the country,” he said.

Walid Jumblatt, the leading Druze politician, weighed into the row on Twitter, saying it was time to complete the budget and focus on next year’s one. “Completing the budget is more important than obstructing it and going into futile debate,” he wrote.

Lawmakers of the Iran-backed Hezbollah movement called for finishing the budget and rapidly sending it to parliament. They added that while the draft budget reduced wastage of public money, it did not “embody a coherent reformist vision”.


Deputy Prime Minister Ghassan Hasbani, speaking to Reuters by phone on Thursday, said he had “deep concerns” about delays to a final agreement, and that additional ideas under discussion amounted to “small, incremental points”.

“Catastrophe has been avoided through this stabilisation budget but much more needs to be done on the structural reform side in order to build growth going forward to avoid any future problems,” Hasbani said.

The reforms sought by Hasbani and his Lebanese Forces party include boosting transfers to the treasury from the profitable state-owned telecom sector and the Beirut port authority while seeking their privatisation.

Hasbani said he believed that, in terms of bank deposits and their stability, “we are in the safe zone because ...this budget has been able to stabilise the situation.

However, he added: “We need to do more than that to encourage more investments and not just deposits.”

The draft budget includes plans for the government to shave some 1 trillion Lebanese pounds ($660 million) from debt servicing costs through issuing treasury bonds at an interest rate of 1%.

“This is good, it helps a lot in deficit reduction ... but for it to be solid and not to be seen as a negative move, it should not be a stand-alone move,” Hasbani said.

“We cannot expect banks to be the sole supporters on an ongoing basis year after year without us taking significant measures from our part also to alleviate the deficit pressure,” he said. (Reporting by Ellen Francis/Tom Perry Editing by Catherine Evans and John Stonestreet)

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