Lebanon.. House of Representatives approves 2024 budget, ignoring important reforms.

The draft law was approved late on Friday after three days of disagreements with caretaker Prime Minister Najib Mikati, which included several spats in the parliament hall, highlighting the deep divisions that have paralyzed Lebanese politics and left a lasting presidential vacuum. General.

A few months after Mikati's version presented in the House of Representatives, the revised budget envisages a significant increase in state revenue generated through value-added tax and customs duties.

These include measures targeting those who made illicit gains during Lebanon's financial crisis, fining companies that unfairly benefited from the central bank's former currency exchange platform and businessmen who profited from the bank's support.

Since Lebanon's economy began collapsing in 2019, the currency has lost 95 percent of its value, banks have prevented most depositors from withdrawing their savings, and more than 80 percent of the population lives below the poverty line.

The government estimates total financial sector losses at more than $70 billion, most of which are concentrated in the central bank.

The vested interests of the political and economic class blocked major reforms demanded by the International Monetary Fund to provide Lebanon with a $3 billion aid package.

These reforms included the approval of legislation to resolve Lebanon's banking crisis and the unification of several exchange rates for the Lebanese pound.

The International Monetary Fund urged Lebanon to consider increasing social spending “aimed at protecting the most vulnerable groups,” and the fund said last year that Lebanon would “plunge into a never-ending crisis” unless it implements swift reforms.

But Mikati said in yesterday's session on Friday, “We were able to stop the decline and start a serious recovery.”

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About 40 of the 128 members of the House of Representatives spoke on the budget, and many protested his statements.

The 2024 draft budget seen by Reuters used an exchange rate of 89,000 Lebanese pounds to the dollar in most calculations, while other calculations set it at 50,000 pounds.

Last year, the central bank lowered the currency's official exchange rate from 1,500 liras, the price of a decades-long peg to the dollar, to 15,000 liras to the dollar.

The approved budget has a calculated deficit of zero percent, with expenditures equal to revenues.

Members of the House of Representatives said that using different exchange rates in the budget would give the impression that the state is earning more than it actually is.

MP Mark Daou told Reuters the difference would be in their favor, so the government may technically have a surplus in Lebanese pounds in 2024, but that doesn't mean it will actually have enough money to spend in dollars.

The Tomorrow Policy Initiative research firm said the draft budget places a “disproportionate burden on middle- and low-income households compared to wealthier households” by lowering the value-added tax threshold for corporations and giving tax breaks to large corporations.

Sami Zgheib, a Lebanese economist at the Tomorrow Policies Initiative, considered the budget an example of Lebanese economic “chemistry”.

It serves no economic purpose or any particular vision beyond repeating the cycle of chaotic collapse of government, economy and society, he told Reuters.

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