Lebanon's budget was approved on January 27th, 2020, amid controversy, constitutional concerns, and political crisis. Protesters remained in the streets, Lebanon's "new" Cabinet of technocrats were seemingly unwelcome, and the overall constitutionality of this process was brought into light by several political and economic figures alike.
Nonetheless, the budget was approved, and now Economist Mohammad Al-Akkaoui is weighing in on whether or not it hit the right marks in addressing Lebanon's escalating financial crisis.
اقرّ مجلس النواب خلال جلسة مناقشة الموازنة العامة يوم الاثنين مشروع قانون موازنة ٢٠٢٠.— Kulluna Irada (@KullunaIrada) January 28, 2020
بالرغم من ذلك، تشدد مجموعة #كلنا_إرادة على ضرورة تقديم خطة إنقاذ شاملة لمعالجة اخطر أزمة اقتصادية، مالية واجتماعية يمرّ بها لبنان.👇 pic.twitter.com/JYgonb8dvn
Mohammad Al-Akkaoui, an economist with Lebanese lobby group Kulluna Irada, expressed his concern over the recently approved budget. Al-Akkaoui holds a master's degree in economics and a research master's in financial economics from Université Paris 1 Panthéon-Sorbonne.
Kulluna Irada describes itself as "a civil organization for political reform financed exclusively by Lebanese citizens residing in the country as well as members of the diaspora."
Mohammad Al-Akkaoui shared with Executive Magazine that Lebanon's 2020 budget is "a clear attempt to maintain the appearance of relatively stable public finances by conducting an artificial curb-down of public spending."
He went on to express that, although the 2020 budget was expected to be the main pillar of a complex crisis management plan that citizens have taken to the streets to demand, the approved budget does not quite succeed in acting as a pillar.
"In reality, it fails to meet the urgency of the financial crisis—in fact, the current situation is not referenced at any point in the budget law," he told Executive Magazine.
He attributed the budget's flaws to its over-reliance on Lebanon's Central Bank, stating:
"A key pillar of this reduction is a gentleman’s agreement involving the Ministry of Finance (MoF), the Association of Lebanese Banks, and Banque du Liban (BDL), Lebanon’s central bank, to drop the government’s debt servicing cost without setting it within a clearly-stated, medium-term debt strategy as part of a crisis management plan."
He further insisted: "What Lebanon urgently needs is an “emergency crisis management team” to coordinate with local and multinational players in designing a macro-fiscal-financial plan to avoid the hardest of landings."
He explained: "The plan would start with restructuring the stock of public debt to a sustainable level, given the amount of expected financial flows in and out of the treasury and the country as a whole."
As he told Executive Magazine, he advises that the government should consider a better distribution of its expenditures. Particularly, he recommends funds be allocated for a social safety net in order to protect those affected by the ongoing crisis.
On another note, he recommends the government to "redesign Lebanon’s tax system" in order to ensure it discourages rent-seeking behavior and encourages productive sectors.
Al-Akkaoui concluded that the 2020 budget was a "missed opportunity" and that it will likely "aggravate the crisis" at this stage, insisting that more corrections need to be made down the line.
For more on his expert opinion, click here.
"The 2020 budget was a missed opportunity to signal to citizens, donors, and the market that the government had decided to face the elephant in the room", said #KullunaIrada's economist @M_Akkaoui. Read the full article published in @executivemag here 👉https://t.co/jmxclzbnrb— Kulluna Irada (@KullunaIrada) February 7, 2020