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French Version

Critics take swipes at 2003 budget draft - karami opens discussion - The Daily Star

Ex-Finance Minister Corm predicts
'further economic stagnation'

The government is unlikely to meet its forecast of a 25 percent fiscal deficit in 2003 and 3 percent growth, economists and politicians who oppose government policies said Wednesday. Economists Abdullah Attieh and Charbel Nahhas doubted the government could meets its targets, which are largely based on fiscal measures spurred by financial pledges secured during November's "Paris II" donor conference.

"You cannot possibly argue against or for this fiscal budget draft," Nahhas said at a conference about the 2003 spending bill, "because you have only two options: either to believe in miracles or dabble in political debate."

Tripoli MP and opposition figure Omar Karami inaugurated the conference, which brought a host of economists and politicians who back the policies of former Prime Minister Salim Hoss on the first day of Parliament's debate over the budget. "The miracle started with Finance Minister Fouad Siniora," Nahhas said, "when he proposed a fiscal deficit of 35 percent, only to find his draft scratched down to 25 percent during a weekend in Sardinia."

Nahhas was referring to Prime Minister Rafik Hariri's weekend in the Italian island of Sardinia in August last year that spawned the current budget draft, with a forecast of a 25 percent fiscal deficit. Attieh said the government is unlikely to meet its deficit forecast as it cannot save more than LL1 trillion in debt-servicing costs. Debt-servicing costs, which eat up between 80 and 100 percent of government revenue, are supposed to go down by $1.2 billion in 2003, based on government projections.

The government is banking on slashing debt-serving costs by using the Paris donor meeting's soft loans and selling zero-interest government debt to commercial banks in 2003. The Central Bank also plans to write off some of its own lending portfolio to the government. "The government has included the Central Bank's write-off of government debt, but it has failed to factor in the extra costs heaped on the bank's swap operations," added Attieh.

The Central Bank often swaps high-yielding Lebanese paper with lower-interest foreign-currency debt to whittle down debt servicing costs. "I cannot imagine how the government can slash a deficit to 25 percent in one year, when the previous government of Prime Minister Salim Hoss proposed 123 measures to slash the deficit to 23 percent over a five-year period," said Attieh.

Former Finance Minister George Corm, a member of the Hoss Cabinet, said the government is unlikely to meet its targets due to its misleading accounting techniques."The 2003 fiscal budget does not include outstanding government dues," he said.

He added that "the problem today is not the failure of the government as much as the feeble parliamentary debate. Almost all MPs whine about the budget, but none of them engage in a real debate over the government's economic policies."

He said the government's trimming of allocations for development and investment projects in the 2003 budget would impede growth. "Due to spending cuts in development and investment projects, the government will be unable to draw foreign grants that often stipulate that governments contribute some of its own Treasury money to funded projects," said Corm. "The inability to draw such funds will lead to further economic stagnation."

Nahhas said the government is not handling the debt restructuring program very seriously and often drops politics into the program. "This orchestra is continually creating provocations on a sectarian basis. One wonders why all the experts on cellular affairs in the Beirut parliamentary bloc are Sunnis … Such issues are keeping the country on the verge of not just economic collapse, but another civil war."

Beirut 27-01-2003
Dania Saadi
The Daily Star

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