BEIRUT, Sept. 27 (Xinhua) -- The 2022 budget approved on Monday by the Lebanese parliament falls short of the promised reforms that would pave the way for a deal with the International Monetary Fund (IMF), experts said.
The budget calculates a deficit of 11 trillion Lebanese pounds (297 million U.S. dollars at the parallel market), with revenues reaching 30 trillion pounds and expenditures estimated at about 41 trillion pounds.
It is worth noting that the parliament only endorses an exchange rate of 15,000 pounds to the dollar compared to the previous rate of 1,500 pounds to the dollar, while the market rate stands at around 37,000.
"The 2022 budget should have included reforms to avoid this huge budget deficit because printing more money is the only way to finance the deficit. However, printing more money will lead to further inflation and more devaluation of local currency," Patrick Mardini, president of the Lebanese Institute for Market Studies, told Xinhua.
As Lebanon has defaulted on its eurobonds, it has lost its access to international financial markets when the government already cannot borrow from local banks in light of the current crisis, thus causing "this inflationary deficit," Mardini explained.
Lebanon has been suffering its worst financial crisis since its civil war from 1975 to 1990 because a shortage of U.S. dollar reserves has led to the sharp devaluation of the local currency by more than 90 percent.
Approving a state budget is one of the conditions for reaching a deal with the IMF, which is seen as the first key step for Lebanon to get out of a three-year crisis that has plunged most of the population into poverty.
A staff-level agreement reached between Lebanon and the IMF in April required the authorities to increase revenues to fund the crippled public sector and calculate customs taxes at a "unified exchange rate."
Mounir Younes, an economist and former editor-in-chief of Al Qabas Kuwaiti newspaper, told Xinhua that the IMF prefers to set the customs rate at the Sayrafa rate, a rate adopted by the Central Bank of Lebanon at 29,800 pounds, in the hope of making it the de facto local and international benchmark for the U.S. dollar to the Lebanese pound exchange rate.
"The IMF aims for a unification of the different exchange rates, but officials view the approval of a higher exchange rate for imports as a move that would be unpopular in the heavily import-dependent country," he said.
On a positive note, the budget's approval would help regulate public finances and improve state administrations before a more comprehensive 2023 budget can be prepared, Younes added.
He also praised the salary increase for all public sector employees to between 5 million pounds and 12 million pounds per month.
"This should encourage public sector employees to stop their strikes and improve the performance of public departments," Younes noted.
Lebanese Prime Minister Najib Mikati has said the 2022 budget was supposed to be corrective and the 2023 budget would include deeper reform measures. ■
