Extra-spending debate settled at $6 billion

Parliament endorses amended draft law allowing Cabinet to spend until end-October

The Parliament last night endorsed a draft law authorizing the Cabinet to obtain Treasury loans worth $6 billion to cover public expenditures up until October this year.

The adopted law is an amendment of the initial bill which was to allow the Cabinet to spend up to $7.6 billion to cover expenses for the entire year.

Critics of the bill had argued that approving it would thwart the adoption of a budget plan, while allowing the Cabinet to spend more without restrictions. “If adopted, the draft law will give (the Cabinet) a license to spend more with no rules,” said Mazen Soueid, Economic Advisor to former Prime Minister Fouad Siniora.

Soueid voiced concern that if the bill was passed it will thwart the adoption of a budget. “We need a budget, and allowing the spending of $7.6 billion (above the ceiling adopted in the 2005 budget) means there is no willingness to adopt a budget,” he said.
MP Ibrahim Kanaan, director of the Finance and Budgetary Parliamentary Committee, said the $7.6 billion bill was not linked to the 2012 budget plan: “Anyway the budget cannot be adopted without approving the financial accounts of the previous years.”

Kanaan had earlier indicated that the draft law was meant to ensure financial stability for the government. “The $7.6 billion (bill) was made to cover spending for the remaining months of the year because it is not practical to hold a Parliament session every two months,” he said.

Lebanon has been without a state budget for the last seven years. Public spending has since been made through a standard 12-month budget plan based upon the spending pattern of the last approved budget which was in 2005. The ceiling for public spending was set at $6 billion, and was exceeded by all successive governments.

The initial amount included in the draft law, $7.6 billion, included $749 million allocated to the Ministry of Telecommunications through a separate decree. The remaining $6.8 billion were to be distributed among ministries and public administrations. One billion had been allocated to pay wages for public sector employees. Another $1.3 billion will be transferred to the state power utility, EDL. The draft law also allocated $980 million to cover ‘financial expenses’, and $880 million for ‘urgent and special expenses’.

The sources of funds needed to cover the extra-budgetary spending haven’t been secured yet. Soueid said that in the absence of a budget, which should secure revenue sources, the government would have to resort to borrowing. “The government would have to issue more Treasury bills, thus increasing public debt, which will raise the interest and lower economic activity,” he said.

“We will secure the funds in the same ways as they had done in the previous governments, through regular Treasury revenues and borrowing,” Kanaan said. He said that the only way to exit the debt cycle is to verify the public accounts for the previous years and adopt a balanced budget. A proposal was made to reconcile all extra-budgetary spending between 2006 and 2011, which comes to $17 billion, through a special law. The proposal was rejected by the Cabinet.

Reported by Hanadi Chami