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What is the point of a budget? A legitimate question considering that on Monday, the Parliament approved the opening of an additional credit line exceeding the total expenditure planned in the 2022 budget (LBP 40 trillion). The move came just days before caretaker Finance Minister Youssef Khalil transferred the draft 2023 budget to the government for approval.
The approval, in Parliament on Wednesday, of an additional credit line to readjust the salaries of civil servants and teachers in the public sector was absolutely necessary, given their meager salaries paid in Lebanese pounds.
However, the timing of this vote, which allowed the government to approve the release of funds for the payment of civil servants before the Adha holiday, is a major blow to the 2023 Finance Bill. It simply entails that this budget will, as usual, be a patchwork of figures that does not include a public sector reform project, which is essential if public spending is to be rationalized and the State’s finances reformed.
That being said, rumor has it that the caretaker Finance Minister is still fine-tuning the revenue and credit figures on the one hand, and the dollar exchange rate for the 2023 budget on the other.
A fictional budget
In any case, it is imperative that the 2023 budget proposal is not fictitious in the sense that the dollar exchange rate adopted for calculating taxes and utility tariffs reflects the reality of the market.
If it is not based on Sayrafa, the exchange platform of the Central Bank – since its sustainability could be linked to the end of Governor Riad Salameh’s term in August – this rate must be pegged on an efficient indicator that takes into account supply and demand on the greenback. In the absence of such an option, the allocations for expenditure items in the 2023 Finance Bill would be rapidly depleted. Consequently, a parody repeat of the inflation that rocked the country between 2022 and 2023 would be inevitable, and the printing of new banknotes would be unavoidable. It is equally unacceptable, given what the country is going through, to avoid linking the opening of additional credit lines to realized revenues, and to leave the financing sources for the planned increases, or to link them to the issue of Treasury bills. This raises the question of the basis on which the additional credits were validated in the absence of a closing of accounts for the 2022 financial year. To make matters worse, it is still unknown under which budget the additional credits were opened, given that expenditure on the basis of the provisional twelfth has been fully incurred. The answer is simple: both the caretaker Minister of Finance and the government allowed spending based on the 2023 budget proposal which has not yet been finalized. And this is pure heresy.
