2012 budget simmering

Finance Minister to increase tax revenues and upgrade social spending: “Cutting balance sheets of 2006-2011 era a mandatory measure”

The Minister of Finance, Mohamad Safadi, said that the 2012 budget plan intends to keep the deficit from growing. “The deficit should not exceed LL5,200 billion ($3.47 billion), but we will seek to reduce it by two percent to GDP,” Safadi said in a press statement.

He said that the ministry has managed to reduce spending by LL600 billion compared to 2010.

Minister Safadi said that the draft budget is based on two pillars: raising the tax income, and increasing social spending. “The two are connected, so if any of them was rejected, the other would ultimately also fall,” he said.
Media reports have stated that the 2012 budget plan will include an increase of the Value Added Tax (VAT) from 10 to 12 percent. In 2007 the government proposed – within the reform package presented at the Paris III - to gradually increase the VAT to 12 percent in 2008, so that it would reach 15 percent by 2010.

“If we decided to add the VAT by two percent, its effect (on the living cost) would not be more than one percent,” Safadi said.

The minister said that he intends to cut the accounts of years 2006-2010. He said that “though the issue is subject to political dispute, the law urges cutting the balance sheets of previous years” so that the cabinet would be able to move forward with the 2012 budget.

Former Minister of Finance Jihad Azour said that increasing the taxes would be beneficial “if it was intended to reduce the debt to GDP ratio, but not to finance the growth in spending.”

Azour said that the current government has not been clear on its financial policies. “The cabinet did not declare its commitment to Paris III objectives,” he said.

The economic reform plan presented to Paris III was designed to stimulate growth, create employment, reduce poverty, and maintain social and economic stability.