By Dana Khraiche
Lebanon’s cabinet approved a draft budget for 2018 that includes shutting some government agencies and cutting public spending by a fifth, weeks ahead of a planned donor conference to revive one of the world’s most indebted economies.
Prime Minister Saad Hariri said his country must take more measures to ease its “economic crisis,” and his blueprint contained stimulus for some sectors. Without a change in direction, Lebanon’s problems would have been worse than those of Greece, he said. “We could have put Greece in our small pocket if we had continued with such spending.”
Lebanon is dealing with a daunting set of challenges that have strained its resources. It is a political battleground between regional foes Saudi Arabia and Iran, which back opposite sides in the seven-year war next door in Syria. That conflict has sent 1.5 million Syrians over the border into Lebanon, as well as blocking land exports and triggering conflict between Lebanese political factions. The U.S. is leading an effort to curb the power of the Iranian-backed Lebanese militant group Hezbollah.
Lebanese bonds have tumbled and bank deposits are growing at their slowest pace since the end of the civil war almost 30 years ago. In an effort to repair some of the damage, Lebanon will seek to raise funds for a $16 billion infrastructure program at a donor conference scheduled next month in Paris.
The draft approved on Monday forecast a budget deficit of $4.6 billion this year, in line with 2017, which was the first year the country had managed to pass a spending plan in a dozen years. Parliament is now expected to hold a series of extraordinary sessions to approve a final budget.
Among other measures, the government and central bank will next month carry out a debt swap to help reduce servicing costs, Finance Minister Ali Hasan Khalil said. Interest on borrowing currently stands at 38.2 percent of overall spending, he said.