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Monday, October 29, 2007

Finance Ministry presents 2008 budget with deficit target of 26 percent

BEIRUT: A 9 percent rise in government revenues, a 3 percent drop in expenditures, a 5 percent decrease in the cost of debt servicing: These projections can be summed up by a budget deficit of 26 percent in 2008. The figures were the highlight of the ambitious 2008 draft budget which was introduced by Finance Minister Jihad Azour at the Grand Serial on Monday.
The draft budget, which is yet to be discussed by Parliament, was seen as a farewell gift from a government scheduled to step down once a new president is elected by the November 24 constitutional deadline.
In addition, Azour predicted GDP growth of 4 percent in 2008, 5.5 percent in 2009 and 5 percent in 2010.
Of course, these upbeat predictions require a stable political and security environment.
According to the projections of the Finance Ministry, total revenues in 2008 should jump to LL8.368 trillion from LL7.675 trillion in 2007 while spending should fall to LL11.475 trillion from LL11.840 trillion.
If the projections are on target, the government will end up with a primary surplus, excluding the cost of debt servicing priced at LL1.543 trillion (about $1 billion), an increase of 110 percent compared to 2007.
To meet these objectives, the government plans to increase the value added tax to 12 percent from the current level of 10 percent, while the taxes on interest rate deposits will jump to 7 percent from 5 percent.
Azour said that the new tax increases were in line with the five-year program that was submitted to the donor states at the Paris III conference in January.
But what is striking about the draft budget was that the projected revenues from the cellular networks, which are currently owned by the state, will fall by 29 percent in 2008 if the privatizations of the mobile companies take place on time.
The government has set February 2008 as the final deadline for the auction of the networks.
Telecommunication Minister Marwan Hamadeh was upbeat about the prospects of fetching a handsome price for the mobile telephone companies.
The minister believes that the ministry can generate up to $6 billion from the sale of two third of the mobile companies to private investors.
Azour said that the 2008 projections are very objective and take into account the current and future developments.
"We made sure that the cuts in public spending will not affect the investment or social and heath sectors," Azour said.
He added that the security and defense spending would increase in the new budget, due to the current circumstances.
"The 2008 draft budget was a translation to the government pledges to the donor states in Paris," Azour said.
He added that the money received by donor states have allowed the government to reduce the size of the public debt.
"We have managed to achieve a primary surplus in our budgets thanks to the grants and soft loans which we received this year," Azour said.
The government received pledges adding up to a total of $7.6 billion from the donor states, of which $3.6 billion was received this year.
The minister said that the rise in the oil prices in the international markets will not stop the government from transferring allocations to Electricite du Liban at least until the middle of 2008.
Responding to criticism about the delay in the successive budgets, Azour said that this is the fourth draft budget submitted by the current government.
"We have sent all the four draft budgets to Parliament and these bills are currently sitting in the drawers of the Parliament," Azour said.
But the opposition argue that the government failed to produce any budget on time, adding that this Cabinet did not respect any deadline since it was established more than two years ago.
Azour said a team from the International Monetary Fund is expected to arrive in Lebanon in one week to assess the performance of the government.
But many international rating agencies and think tank groups have expressed fear that the political deadlock may degenerate into open confrontation between the government and opposition forces.
They warned that the future of reforms and privatization will in be great jeopardy if the presidential elections were not held on time or a second government was formed.
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1 comment:

Qing-jao said...

Well written article.