Lebanon’s government met on the budget Monday for the first time in more than three months as talks with the International Monetary Fund about the country’s economic meltdown were poised to resume.
The developments were aimed at controlling Lebanon s worst economic crisis in its history. The Cabinet meeting at the presidential palace was held after the powerful Hezbollah and its main Shiite ally ended their boycott and were poised to participate in the design of a recovery plan.
The draft budget for 2022 is expected to propose increasing taxes and fees in a country struggling to deal with soaring poverty levels and hyperinflation.
It also projects spending more than 49 trillion pounds while revenues stand at just over 39 trillion pounds, with a deficit of about 21%. Critics say that the deficit will be covered by printing money, in what would lead the Lebanese pound that has lost more than 90% of its value over the past two years to lose more in the coming months.
It is not clear what exchange rate the government will use for the budget as there are several rates around the country. The official rate still stands at 1,500 pounds to the U.S. dollar while the black market rate is about 23,000 pounds. Several other rates are used for withdrawal of bank deposits.
Lebanese economist Alia Moubayed described the draft budget as “malignant and dangerous,” with problems ranging from the use of several exchange rates to indirectly legalizing the transfer of foreign currency deposits into Lebanese pounds. Also of concern, she tweeted, is the government’s failure or refusal to recognize the “disastrous” economic and social status that resulted from decades of corruption and mismanagement by Lebanon’s political class.
Lebanon’s economic crisis has been described by the World Bank as one of the worst in the world since the 1850s. The meltdown has left three-quarters of the population of 6 million people, including 1 million Syrian refugees, in poverty.
The government is expected to discuss the draft budget every day until Friday. If approved, it will be sent to Parliament for discussion and will need majority vote to pass.
The meeting is the first since Oct. 12, when Hezbollah and its ally, the Amal party of Parliament Speaker Nabih Berri, demanded changes in the national probe of the devastating August 2020 explosion in Beirut’s port and effectively paralyzing the government.
Hezbollah had called for the investigative judge in the port blast to be removed, accusing him of bias. Judge Tarek Bitar has meanwhile faced a slew of legal challenges and lawsuits calling for his removal, which forced him to suspend the probe at least four times. The probe is currently suspended.
Bitar had summoned and charged several senior officials on charges of intentional negligence that led to the explosion, which killed more than 200 people and injured thousands. The two Shiite groups vowed to continue their efforts to remove the judge.