Prof. Jassem AJAKA
Physicist and Economist

The government completed a little of the Baabda paper and the road is long

Addyar | Professor Jassem Ajaka

Negative reports published by credit rating agencies and the International Monetary Fund have accelerated the passage of the Baabda Economic Finance Paper which has been shown as a salvation paper to emerge from the crisis (which we have seen). The participants in the meeting in Baabda highlighted the importance of the application of this paper for Lebanon and the reform track followed by the Authority since the formation of the government, which showed its ministerial statement as a government of economic financial reform reform par excellence.

However, the facts on the ground show a slowdown in the implementation of the Baabda economic reforms, which we consider a key passage to safety. This is not a point of view. The visitors of President Michel Aoun conveyed his blame for the failure of the government to take swift action and he is working on more than one front in different directions to save the economic situation.

Introduction The Baabda paper states in its foreground the seriousness and accuracy of the situation the country is going through. It proposes a number of “urgent initial measures to address the crisis”.

In describing the current situation, the paper described the situation as very difficult with a deficit in 2018 of US $ 6.25 billion (or 11.

The paper elaborated on the negative points in the public finances with the decline in the volume of foreign direct investment, the decline in financial flows from abroad, increasing the difficulty of financing the state in foreign currency, a steady rise in the volume of public debt (more than 15

Most importantly, the paper concluded that, in this context, measures should be put in place to: correct fiscal and control public debt, address external current account imbalances, and build a competitive and inclusive productive economy that achieves sustainable growth at high rates.

On this basis, a list of actions to be taken has been drawn up and divided into four axes, each of which has a semi-detailed list of actions to be taken. However, more than a month after the Baabda Finance Paper was adopted, very little was done! This is despite the delicate financial and economic situation. Here we wonder about the reasons behind the delay in the application of the Baabda Economic Finance Paper, which was originally designed to face a “delicate financial situation”?

It is clear that the current balance of political forces cannot deal with the rapid changes imposed by the procedures stipulated in the Baabda paper under the threat of a political crisis between the political forces. So files are handled carefully.

But what has the government applied so far from the Baabda economic paper? The answer is ‘almost nothing’!

} Fiscal Policy

At the center of fiscal policy, the Baabda Economic Paper proposes a list (the longest) of measures aimed at remedying the overall fiscal situation, which suffers from excessively high spending and declining revenues, causing a chronic deficit associated with the country’s difficulty in accessing finance markets at reasonable cost.

The Baabda paper promised to approve the 2020 budget on its constitutional dates, and the Minister of Finance has already submitted the draft budget that the government is working on. However, concerns are that the 2019 budget experience will be repeated with dozens of sessions spanning more than a month, contrary to the Baabda paper.

The Baabda paper also promised to reduce the deficit to a maximum of 6.

Despite the Baabda paper, reducing current spending (contributions and assistance outside the public sector, consumer goods and services in the budget and servicing public debt) and increasing revenues (improving tax collection, combating tax evasion, combating customs smuggling and illicit enrichment, reforming the tax system, and collecting arrears accumulated on ), But this has not yet been done.

The Baabda paper also stipulates the adoption of a policy of “balanced balance” between regular public revenues and public expenditures (excluding investment expenditures) gradually to reach full balance in 2022. However, this principle remains as shy as the actions taken in the draft budget for 2020 show especially If the principle of quotas is adopted to reduce spending!

As for the remittances to the EDLs, which pledged Baabda paper to a ceiling of no more than 1500 billion pounds, we believe that this ceiling will not be respected. However, it seems that some of the points made by the Baabda paper are on the right track, such as removing online encroachments and following up the implementation of the plan (directly from Prime Minister Hariri).

The paper also stipulated the holding of international public tenders for the purchase of hydrocarbons to EDL, within an integrated book of conditions, which adopts the highest standards

The paper also stipulated the holding of international public tenders for the purchase of hydrocarbons to EDL, in an integrated book of conditions, which adopts the highest standards of transparency. This has not been done and there is no (as we have noted) any measures in the draft 2020 budget in this regard, knowing that oil prices are heading up after the attack on oil facilities in Saudi Arabia.

Among the measures proposed by the paper is to increase the share of investment projects financed through soft foreign loans after studying their financial feasibility or jointly with the private sector. This has not yet been implemented and the main dependence on the Cedar projects, which are awaiting the release of funds, especially with the visit of Prime Minister Saad Hariri to France. The latter, which remains unhappy with the pace of reforms, has, according to information, imposed serious steps within two months for Cedar conference lenders.

The Baabda paper also proposed freezing the increase in salaries and wages for three years, increasing pension deductions from

Taxation, high profits on concessions and activities harmful to the environment and monopolies, and review of all tax exemptions, proposals in the Baabda paper, but what has been done is a plan for the Ministry of the Environment, including taxes on activities harmful to the environment worth $ 400 million.

We also find among the financial proposals, the formation of a committee to reform the pension system and the end of service in the public sector, fill the vacancies in the Audit Bureau and activate its role, review the tax system and approve the progressive tax, complete the work to curb tax evasion, continue the plan to combat smuggling, consolidate databases and information between Ministry of Finance and Social Security, undertaking radical and immediate reform of public institutions, councils and bodies and tightening control over them, including enforcement and recruitment processes, tightening control over every institution that benefits from public funds, working to reduce the size of public debt, Generally, e-government, but none of these measures have been implemented so far except for some institutions that have been proposed for approval by the Ministry of Finance on their budgets!

Economic Policy

The Baabda paper suggested economic policy, stimulating increased production through the development of production of goods and services while protecting the environment, adopting technology intensively and steadily, stimulating women’s participation in economic activity, creating new jobs for Lebanese, speeding up discussion of McKinsey study, reforming the system Support, direct implementation of the necessary public investment program (SIDER), completion of electricity and sanitation projects, adoption of a sustainable solid waste management plan, adoption of public transport system, updated road network, trains, buses and trams, and through maritime and air transport. The implementation of IDAL, the adoption of a modern and developed law for public transactions and its immediate implementation, the completion of the unified window, the adoption of measures aimed at developing financial markets, the development of the insurance sector, the completion of the law of micro, small and medium enterprises, competition law, Protection of geographical indications, draft law for the establishment of the Lebanese Export Development Agency, laws relating to the protection of literary and artistic property, draft law on the recovery of looted funds.

In fact, from this long list, only a president and a board of directors have been appointed to IDAL, and a section of the Ministry of Environment’s solid waste plan has been approved. There may be work on the scenes on these points, but government decisions are the only criterion that can be taken.

Addressing the balance of payments imbalance

These are five measures proposed by the Baabda paper in this regard: focusing on exporting services that Lebanon enjoys with competitive advantages, encouraging exports, securing an appropriate and stable political atmosphere, accelerating joint operations in infrastructure projects to attract funds, and following up the implementation of the articles contained in the trade agreements to which it is a party. Lebanon. What has been achieved, however, is to provide a fairly quiet political atmosphere (which is essential).

Social Policy

The Baabda paper approved a number of measures aimed at increasing social security: the adoption of a pension and social protection system for all Lebanese within six months to a year, the adoption of a universal health coverage system for all Lebanese residing in Lebanon, the completion of the automation of all operations of the National Social Security Fund, the development of a housing policy , Based on the principle of the right to housing. Also, a few steps have been taken to increase the Ministry of Health’s budget allocations in the 2020 budget, in addition to a housing plan prepared by the Housing Foundation that has not yet been approved by the government.

The foregoing is that the government accomplished the paper Baabda very little and the road is still long and Lebanon does not have the luxury of time. It may be that these reasons led the president to tell his visitors that he was dissatisfied with the pace of government work.

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