The legislature approved a budget with a six per cent deficit/Bloombergby Bloomberg
The Lebanese parliament has approved the 2020 budget plan with a crucial Eurobond payment weeks away, leaving it to the new government to decide on whether to pay creditors or save what’s left of the country’s reserves.
According to the National News Agency, the 2020 budget was passed by a vote of 49 to 13, with eight abstentions. The legislature approved a budget with a six per cent deficit, a huge difference compared to a zero-deficit budget that was being targeted by Lebanon’s former government.
Protests that brought down the government in October 2019 have in recent weeks turned violent, with hundreds injured in scuffles with security forces. Unrest erupted late last year after people accused the political class of corruption and neglecting living conditions.
A new government formed last week has not yet won a vote of confidence from parliament.
State revenue slumped by nearly 50 per cent toward the end of last year because of the economic and financial crisis, which saw banks rationing dollars and tightening restrictions on the movement of capital. The measures have blocked trade and led to the rise of a black-market exchange rate in a country heavily reliant on foreign goods.
The central bank said it would waive interest payments on local-currency-denominated debt this year. Authorities want to use the saved funds, amounting to about LBP 2.9 trillion ($1.9 billion), to reduce the budget deficit.
A plan to impose a one-time tax on banks’ profit to generate $400 million fell through.
The budget includes a draft law that amends the limit covered by the National Institute for Bank Deposit Insurance to LBP 75 million from LBP 5 million, established under Lebanon’s monetary law.
The new measures allow businesses to postpone some of their debt payments for six months and foresees the formation of a supervisory body that oversees state loans and grants in a bid to limit corruption.