BELIEF, Debt Crisis, Fiscal Deficit, Economic Update

The 2024 Budget Draft: Concerns Over Government Borrowing

13:44 | 31 October 2023LIMS output
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The 2024 Budget Draft

The Finance and Budget Committee completed its assessment of the first part of the 2024 budget draft presented by the Lebanese Government. The committee opted to revoke the government’s authorization to borrow, citing apprehensions surrounding the persistent reliance on borrowing. This decision signifies that any future borrowing by the government will necessitate returning to parliament for approval, injecting an added layer of legislative oversight.

LIMS observed that the committee’s stance aligns with the acting Central Bank governor’s resolution to refrain from lending to the government without the requisite legislative endorsement. Central to this unfolding scenario is Lebanon’s government proposing a budget with an alarming deficit of approximately 41 trillion LBP, lacking any identified means to bridge this fiscal gap. LIMS encouraged the parliament to oppose any proposal featuring a deficit, urging the government to present a balanced budget.

LIMS emphasizes that achieving a balanced budget is also imperative for the transition from the existing SAYRAFA exchange rate platform to the anticipated “Bloomberg” platform. Bloomberg holds the potential to consolidate Lebanon’s myriad exchange rates, contingent upon the central bank distancing itself from erstwhile practices. Historical interventions involved the sale of dollar reserves below market rates to stabilize the exchange rate, inadvertently fostering the proliferation of multiple exchange rates.

Furthermore, the unification of exchange rates necessitates the new platform to be accessible to all market participants, either directly or through intermediary banks. This expanded accessibility promises enhanced transparency, channeling exchange rate operations from the informal market to banks. Such a transition addresses concerns surrounding the substantial cash economy, curbing issues related to illicit activities and money laundering.

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