Michael Karam: Lebanese budget a real achievement

After 12 years, the Lebanese government has finally agreed on a budget. So, what took it so long?

The Lebanese government has approved a budget for the first time in 12 years. The issue had become a running gag, a symbol of the state’s chronic dysfunctional nature. But just when we thought that thrashing out an electoral law was the priority, we woke up yesterday to a raft of new taxes.

Among other items, VAT has been increased, as has the price of stamps on phone bills, judicial records and receipts. Public notary fees have been doubled and tax on cement and construction licences have gone up. Income tax will be “adjusted” and there is a new levy on anyone leaving the country, depending on the class of ticket. The income tax change is going to go down like a lead balloon, especially as there was no change to the salaries of MPs, ministers and the troika of senior positions – the president, the prime minister and the speaker of parliament – which, with benefits and pensions, comes to a whopping estimated US$50 million annually.

Apparently there’s easily an extra $1 billion in all that, although that figure could probably be found if the state simply managed more efficiently the collection of levies from existing entities – electricity comes to mind – but that’s clearly too much trouble.

Back to the budget. How, you ask, was the country able to function for the past 12 years if there was no consensus on how to allocate the contents of the state coffers? A friend who used to work at the ministry of economy explained what happened since 2005, the year of the Cedar Revolution: “The country functioned by replicating the 2005 budget and voting in additional funding on an exceptional basis. It was a total mess.”

You don’t say. But why the reluctance? Surely even a government as bonkers as Lebanon’s needed to decide how much it costs to run the country and make an effort to balance the books. “To my knowledge the ministry of finance drafted a budget each year,” she said, “but [the] March 8 [bloc] continuously refused to vote on any of them because they accused former March 14 [bloc] ministers of finance such as Jihad Azour and Raya Al Hassan of corruption and asked them to explain certain extra budgetary spending.” Both left office years ago, Mr Azour in 2008 and Ms Al Hassan in 2011, but by then the anti-budget policy was cemented in lore.

Indeed, anyone familiar with the working of the Lebanese mind, and the fog of suspicion and paranoia that can cloud it at a second’s notice, will know that that’s all it took to indefinitely jam any national process. Mr Azour, now the IMF’s director of the Middle East and Central Asia department, and Ms Al Hassan were very capable technocrats and the accusations were probably stirred up to divide an already polarised country.

But what of the people? Surely over the past 12 years they should have demanded that the state be accountable, that the government, of which there have now been five since the last budget, outline what it’s going to spend on as well as what is and what’s not being taxed. But there wasn’t one comprehensive plan on how the country was financed and no genuine debate on growth predictions, public borrowing, personal taxation, savings and pensions, business rates and taxation, banking, education and health. Meanwhile most of us lost interest.

So why was this year any different? It is true that this recent government was formed amid a mood of newly found national unity but we have been here before, most recently in 2008, when March 14 and March 8 kissed and made up at a Qatari-sponsored meeting in Doha, hastily arranged after March 8 sent its gunmen on to the streets to overthrow the government.

No, this year it appears the long-demanded pay rise from public sector employees could no longer be ducked and the state had to find $800m and decided it could only do this by taxation. This may be a bitter pill for the Lebanese to swallow as most see the public sector as bloated, lazy and riddled with unqualified sectarian appointees.

But on balance, any budget is an achievement. Lebanon, which we forget has a public debt of more than $74 billion, over one-and-a-half times its GDP, needed to get a grip on state finances.

Michael Karam is a freelance writer who lives between Beirut and Brighton.

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