February 19, 2018 / 2:09 PM / in a month

Lebanon cannot ask for donor funding without passing 2018 budget -minister

BEIRUT (Reuters) - Lebanon cannot ask for support at upcoming donor conferences unless it first passes the 2018 budget, the finance minister said on Monday, a move which would signal to potential financial backers that the government is serious about economic reforms.

Lebanese President Michel Aoun heads the cabinet meeting at the presidential palace in Baabda, Lebanon February 19, 2018. REUTERS/Mohamed Azakir

Political tensions had left Lebanon without a government budget from 2005 until it passed one last year. The government must now agree a budget for 2018.

Lebanon is expected to ask donors at a variety of international meetings this year for support for its economy and army, and to help it deal with the approximately one million Syrian refugees it is hosting.

Agreeing the 2018 budget would signal to potential donors and investors that Lebanon is genuine about much-needed economic reform, financial sources have told Reuters.

“This is not a luxury, but a duty,” Finance Minister Ali Hassan Khalil said in a televised statement.

“If we are serious about preparing for the planned international conferences to support Lebanon in Rome or Paris, we absolutely cannot attend such conferences and ask for support without the budget having been approved,” he said.

Khalil said there is a commitment to finalizing the 2018 budget and referring it to parliament for approval by end of the month. If this is done within 15 days there is a possibility it will be approved before parliamentary elections scheduled for May.

Finance Minister Ali Hassan Khalil is seen at the presidential palace in Baabda, Lebanon February 19, 2018. REUTERS/Mohamed Azakir

Lebanon has not held elections since 2009 due to a series of security and political crises.

President Michel Aoun told Lebanon’s cabinet earlier on Monday that they must “intensify” work to pass the budget as soon as possible.

Lebanon has one of the world’s highest debt-to-GDP ratios in the world and its economic growth is very weak, battered by domestic political tensions and conflict in neighboring Syria.

Khalil said the draft 2018 budget envisages a “big deficit” of more than 8,000 billion Lebanese pounds ($5.3 bln).

Lebanon’s 2016 deficit was 7,453 billion Lebanese pounds ($4.94 bln), according to the latest Ministry of Finance figures.

Prime Minister Saad al-Hariri on Monday said Lebanon must not allow its public debt to rise and asked state institutions to comply with his January directive to cut budgets by 20 percent.

Khalil also said there will be no new tax measures in the 2018 budget. Last year Lebanon introduced a number of controversial tax hikes including corporation tax and VAT in order to finance a public sector pay rise.

($1 = 1,510.0000 Lebanese pounds)

Reporting by Lisa Barrington and Dahlia Nehme; Editing by Peter Graff, William Maclean

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