UPDATE 4-Lebanon finance minister: no need for more talks over draft budget

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* Lebanon has one of world’s highest public debt burdens

* Cabinet aims to cut budget deficit to 7.6 pct of GDP

* Plans have triggered protests, strikes

* Markets will welcome efforts to slash deficit – analyst (Adds information minister)

BEIRUT, May 21 (Reuters) – Lebanon’s finance minister said on Tuesday no more talks were needed over the 2019 draft budget, seen as a vital test of the government’s will to reform.

The cabinet says the budget will reduce the deficit to 7.6% of gross domestic product (GDP) from last year’s 11.2%. Lebanon has one of the world’s heaviest public debt burdens at 150% of GDP.

Lebanon’s ministers will convene on Wednesday for a final reading of the draft budget, Information Minister Jamal Jarrah said after the cabinet session on Tuesday.

“There is no longer need for too much talking or anything that calls for delay,” Finance Minister Ali Hassan Khalil said earlier.

But Foreign Minister Gebran Bassil suggested the debate may go on, telling reporters: “The budget is done when it’s done.”

While Lebanon has dragged its feet on reforms for years, its sectarian leaders appear more serious this time, warning of a catastrophe if there is no serious action. Their plans have triggered protests and strikes by state workers and army retirees worried about their pensions.

President Michel Aoun on Tuesday repeated his call for Lebanese to sacrifice: “(If) we want to hold onto all privileges without sacrifice, we will lose them all.”

“We import from abroad, we don’t produce anything…So what we did was necessary and the citizens won’t realise its importance until after they feel its positive results soon,” Aoun said, noting Lebanon’s $80 billion debt mountain.

A draft of the budget seen by Reuters included a three-year freeze on all forms of hiring and a cap on bonus and overtime benefits.

The budget will also have a 2% levy on imports including refined oil products and excluding medicine and primary inputs for agriculture and industry, said Youssef Finianos, minister of public works and transport.

“DEVIL IN THE DETAIL”

Marwan Mikhael, head of research at Blominvest Bank, said investors would welcome the additional efforts in the latest draft to cut the deficit.

“There will be some who claim it is not good because they were hit by the decline in spending or increased taxes, but it should be well viewed by the international community,” he said.

Jason Tuvey, senior emerging markets economist at Capital Economics, said: “The numbers will be of some comfort to investors, but the devil will be in the detail.”

“Even if the authorities do manage to rein in the deficit, it probably won’t be enough to stabilise the debt ratio and some form of restructuring looks increasingly likely over the next couple of years,” Tuvey said.

The government said in January it was committed to paying all maturing debt and interest payments on the predetermined dates.

Lebanon’s main expenses are a bloated public sector, interest payments on public debt and transfers to the loss-making power generator, for which a reform plan was approved in April. The state is riddled with corruption and waste.

Serious reforms should help Lebanon tap into some $11 billion of project financing pledged at a Paris donors’ conference last year.

Once approved by cabinet, the draft budget must be debated and passed by parliament. While no specific timetable is in place for those steps, Aoun has previously said he wants the budget approved by parliament by the end of May.

On Monday, veterans fearing cuts to their pensions and benefits burned tyres outside the parliament building where the cabinet met. Police used water cannon to drive them back.

Reporting by Ellen Francis and Tom Perry; Editing by Gareth
Jones

Our Standards:The Thomson Reuters Trust Principles.

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