Economic Issues Dominate Parliament’s Business as New Government Strives to Implement CEDRE Reforms

March 13, 2019

 

Perhaps the Interministerial delegate to the Mediterranean in charge of the preparation of the CEDRE conference, Ambassador Pierre Dukan (Duquesne), summarized the situation accurately when he noted in a press conference following a meeting with Prime Minister Saad Hariri, “Concerning the reforms, there are both sectoral reforms that are simply useful for the projects to be put in place properly. In addition, there are reforms that are more macro-economic, more substantial, and indispensable. At the crossroads of the two, there is the reform of the energy sector, which is a macroeconomic problem - the accumulated deficits of Electricité du Liban weigh heavily on the Lebanese public finances. And without electricity 24 hours a day, it is difficult to imagine that investments in any sector of economic life can be made.”

 

It is quite clear that many of the CEDRE reforms are intertwined. Without energy, investors will bide their time. Without a transparent judicial system and regulations to protect investments, investors will go elsewhere. Without infrastructure for logistics, marketing, and distribution, investors will find other countries for their projects. This is the challenge – where to begin and how to set priorities.

 

The Lebanese Center for Policy (LCPS) has launched a new service, The Government Monitor, which will “evaluate the Council of Ministers’ work, inform key stakeholders of its research findings, and seek to influence decision makers by advocating for the implementation of national policies that address citizens’ needs.” In its March 1 report, it noted that the ministerial statement adopted by the Parliament indicates that the “government has prioritized governance and fiscal reform measures over sectoral ones. The government adopted most measures related to governance (8 of the 11 CEDRE governance measures), more than half of CEDRE fiscal measures (13 of the 23), and two of the four private sector development measures, while only 13 out of 32 CEDRE measures in sectoral policy areas were included and none of the judiciary reforms were adopted.”

 

The immediacy of the reforms was referenced by Ambassador Dukan as he noted that the CEDRE agreement incorporated three elements: critical infrastructure projects, financing for projects associated with the CEDRE plan, and needed reforms. He stated quite clearly that although its implementation would take several months to launch, “signs must be given that confirm what we see in the ministerial statement, which is the will of the Lebanese political authorities to move forward, on the implementation of the infrastructure plan, on the sectoral reforms and on the macroeconomic reforms, with a significant attention from donors on the fight against corruption which is another difficulty weighing on the country.”

 

The most immediate challenge is adopting the national budget. Finance Minister Ali Hassan Khalil said that the 2019 state budget is now with the council of ministers for their review and it will send it on to parliament for approval by the end of May. This means further delay as sector specific projects under the CEDRE agreement are awaiting passage of the public-private partnership law and allocations to sectors under the budget. Other than financial reforms, CEDRE expects reforms on the refugee issue, the electricity sector, the participation of women in public and political life, as well as the fight against all kinds of corruption. Already parliament is arguing about raising public sector salaries pitting those in favor without offsetting income to the government versus those who want a pay-as-you-go formula that ties new expenses to a broadening of the tax base and more efficient collections.

 

Some analysts doubt that Parliament has the will to adopt far-reaching reforms. Hilal Kashan, chair of the Political Studies Department at the American University of Beirut, ruled out the possibility of conducting any reforms in Lebanon, mentioning that the Lebanese system relies on patronage, and reduced spending means clamping down on corruption and patronage. Sami Nader, director of the Levant Institute for Strategic Affairs in Lebanon emphasized the need to tackle corruption, saying Lebanon should be looking to the future in a bid to save the country. He noted in particular the promise to reduce the fiscal deficit by 1% annually for five years and dealing with the electricity issue that cost the government over $2.5 billion a year in subsidies.

 

Lebanese leaders were quick to announce their support for anti-corruption measures. Lebanon, ranking 138 out of 180 countries in Transparency International’s global ranking, has one of the worst rankings in the world, and it is endemic within all levels of government service. The Speaker of the Parliament, Nabih Berri, said that there is no alternative but to succeed in fighting corruption and fulfilling pledges made in the ministerial statement. He warned that “Any country that does not submit to the law is a breeding ground for corruption, chaos and bankruptcy.” Berri also mentioned the need to avoid disunity within the Cabinet, saying he was “not afraid for the government, but...of the government; we don’t want every minister to act like an independent government.”

 

Hezbollah chief Sayyed Hassan Nasrallah also pledged to support the anti-corruption fight as a “sacred duty” as important as its resistance in the south. “You can expect everything from Hezbollah in this battle because it is necessary and is related to the survival of the state and the country.”

 

For the latest rankings of Lebanon’s fiscal health by Moody’s and Standard & Poor’s, click this link.

 

 

 

 

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