Lebanon needs a plan for economic and social growth
It is often said that accountability is a key tenet of good governance. This is something we clearly lack in Lebanon. Too often, government institutions fail to meet the needs of citizens or to properly allocate resources in a transparent way that benefits them. This is a country with so much potential and yet so little effort is made to reap the benefits that could be enjoyed, once proper structural reforms are undertaken.
Lebanon has been bearing the severe consequences of the war in Syria in 2011, with 1.5 million Syrian refugees living within its borders. Coupled with a lack of a comprehensive economic vision, endemic corruption and political instability, challenges that the country has long faced are being exacerbated by the regional situation. That has manifested itself in sluggish economic growth averaging one per cent, chronic twin deficits in both budget and foreign trade, and an alarming fiscal deficit – the difference between budget revenue and expenditure – equating to more than 11 per cent of GDP.
As a result, the debtto-GDP ratio exceeded 160 per cent, one of the highest in the world. This drastic economic situation calls for proper action from government to allow the economy to grow and prosper. That action has been lacking. A wellplanned budget is crucial for any government to ensure economic stability, growth and the creation of jobs. Lebanon had the opportunity, during the 19 sessions that were held by the government to discuss the budget, to enact a plan that was capable of ensuring an effective tax policy and a productive economic vision.
Unfortunately, this was not the case. In addition to missing all constitutional deadlines, the Council of Ministers last month approved a draft budget that lacked any sort of vision or will to put forward much-needed real reform. Instead of structural reform in the public sector, it sought to transfer costs to the private sector through new taxes that were either poorly assessed or had not been assessed not at all. The approved budget was clearly designed to meet one of the conditions of the $11 billion funds promised at last year’s Cedre conference in Paris – namely, reducing the fiscal deficit by one per cent of GDP annually over five years.
This was evident in the optimistic revenue figure projections amid a period of stagflation, despite the fact the government has always failed to meet budgeted figures in previous years. The most alarming aspect was the wage bill, constituting more than 37 per cent of total expenditure, compared to an Organisation for Economic Co-operation and Development average of 15 per cent, with no major effort made to reduce public sector costs, clearly pointing to a lack of will to tackle corruption, clientelism and economic mismanagement.
The main consequence if this draft budget is adopted will be a recessionary effect on consumption, one of the main pillars of GDP. The proposed revenue measures will not only affect citizens’ purchasing power but also feed into higher inflation and hence impact overall economic growth. The budget merely focused on targeting fiscal deficit, with no view to economic growth or social progression. The government has failed to tackle tax evasion or enforce laws.
This weak rule of law and poor governance poses a major threat to social and economic development, hindering structural reforms and policies requiring action. The country is now in great need of an overarching comprehensive economic vision that can be translated into a medium-term framework. This vision should not only include targets and aspirations but focus on how our economy can be saved, coupled with political will and drive. The economy needs direction. It needs a coherent and credible vision to spur economic revitalisation and to advance a set of robust policies. Time is of the essence and action should be taken immediately to cushion the threat our economy is facing.
The ultimate priority needs to be given to implementing principles of accountability, good governance and equal opportunity. We dream of a welfare state that plays a crucial role in protecting the economic and social wellbeing of citizens, promoting a competitive, strong, resilient Lebanon, and of a government that enables people to lead fruitful lives. These dreams can still be achieved. Parliament can still incorporate reforms and adjustments to the budget before its final ratification this month.
The budget, if done properly, will be the first right step on a long way towards a better Lebanon. Despite its compact size, Lebanon’s people, produce and success stories have marked its spot on the global map. I have full faith in my country but it cannot prosper on its own.