- 12:55
On October 4, 2024, Caretaker Prime Minister Najib Mikati's government issued Decree No. 14076, submitting the 2025 draft budget to Parliament. Signed by Mikati and Finance Minister Youssef Khalil, it has since been left untouched, pending review by key committees, notably the Finance and Budget Committee and the Administration and Justice Committee.
All eyes are now turned on Parliament to take a clear stance and return the draft budget to the government. A broad consensus has emerged on the urgent need to revise the proposal, as its figures have become entirely unrealistic following the Israeli war on Lebanon. Without necessary amendments, the draft threatens to unleash significant financial, economic and social repercussions.
What MP Ghada Ayoub, a member of the “Strong Republic Bloc,” wrote on the “X” platform was particularly noteworthy, as she remarked, “As representatives of the entire nation, it is our duty — especially given that the prime minister-designate is preoccupied with government formation and resolving ministerial portfolio issues, and with a caretaker government in place — to ask the following legitimate questions on behalf of the Lebanese people: Why has the Finance and Budget Committee not yet convened to discuss the 2025 budget, although it has been submitted within the constitutional deadline? Is it acceptable to wait until the end of January for the budget to be issued by decree, thus imposing it on taxpayers? Does the budget reflect the new reality following the ceasefire agreement and its related arrangements? Can the new presidential term start with a budget that is opaque, short of capturing the true financial situation, while lacking economic, financial or reformative vision, and any plans for rescuing the current year?” She concluded her post by sharing a copy of the referral letter dated October 4, 2024.
The issue of constitutional deadlines has resurfaced, emphasizing the necessity for Parliament to act quickly and reject the draft budget. As we are still within the legal timeframe — since the budget was submitted on October 1 — there remains the possibility to send it back to the government until the end of January to produce a more accurate version. Sources confirm that the president of the Republic is not inclined to issue the budget by decree, in accordance with Article 87 of the Constitution. Nevertheless, urgent action is required to avoid chaos in public spending based on the twelve-month rule at the end of January.
The 2025 budget is no longer realistic in light of the recent Israeli war. It is, in fact, largely speculative, especially regarding revenue estimates. According to Hicham Mukammal, President of the Fiscal Association, the entire 2025 draft is inaccurate for several reasons. “It is impossible to meet the projected spending outlined in the budget without considering the consequences of the war, as many companies that contributed to the state’s revenues have been severely damaged.”
Mukammal argues that the costs of reconstruction, rehabilitation of infrastructure and restarting government agencies post-conflict require additional expenditures that were not previewed in the 2025 budget, which was prepared prior to the war. He also points out that the draft lacks a clear economic vision and should include laws to help private institutions survive and recover from the war’s aftermath.
Ibrahim Kanaan, head of the Parliamentary Finance and Budget Committee, has called for a comprehensive review of the draft budget by the government. After a detailed analysis, Kanaan concluded that the proposed budget is unrealistic in addressing the exceptional challenges posed by the war, notably its significant impact on both revenue projections and collection.
The government's proposed budget estimates revenues at approximately 445.214 billion Lebanese pounds, an increase of 136.779 billion pounds (or 44.35%) compared to the 308.435 billion pounds projected in the 2024 budget law. A staggering 91% of these revenues are expected to be generated from income and capital taxes, domestic goods and service taxes, and duties on trade and international transactions — elements most vulnerable to the effects of the Israeli war on Lebanon.
On the expenditure side, the 2025 budget estimates spending at 445.214 billion pounds, an increase of 136.779 billion pounds (or 44.35%) over the 308.435 billion pounds allocated in the 2024 budget. However, these figures are unsustainable, with the deficit potentially rising from 20% to 200%. In short, the proposed estimates for expenditures and allocations are not grounded in reality and must be revisited.
The budget must, at the very least, provide an accurate assessment of revenues and expenditures, ensuring that these revenues are allocated to ministries, departments and institutions based on well-defined priorities. It is also critical to address a key challenge: the government’s inability to secure the necessary funding to cover these allocations in the proposed budget. This stems from Lebanon’s suspension of Eurobond payments and interest on March 7, 2020, under Prime Minister Hassan Diab's administration. Furthermore, domestic borrowing appears unfeasible, as banks are unlikely to participate in any bond issuances, and the Central Bank (BDL) continues to refuse financing government spending in the absence of a legal framework, as stipulated by Article 8 of the Constitution.
Comments