Lebanon cabinet approves austerity budget as public sector protests escalate

Lebanon's government Monday approved a long-awaited austerity budget, Finance Minister Ali Hasan Khalil said.

The budget is aimed at rescuing an economy crumbling under massive debt and unlocking billions in international aid, but could meet resistance from those working in the public sector.

"We are ahead of an extraordinary transformation that is... essential to cut spending and boost earnings," he told reporters after a cabinet session at the presidential palace.  

Sealing weeks of acrimonious budget talks, Khalil said the cabinet approved a budget expected to trim Lebanon's deficit to 7.59 percent of gross domestic product - a nearly four-point drop from the previous year.

This will be achieved by limiting spending to 25,840 billion Lebanese pounds ($17.1 billion) and accruing a total of 19,6000 billion pounds in government earnings, he said. 

Debt servicing and public sector salaries and benefits each will make up 35 percent of the budget, while government subsidies to the state-owned electricity company will constitute 11 percent, he added. 

Lebanese public employees, however, have warned that their benefits are a red line.

For the first time in the country's history, a strike by central bank employees briefly crippled the country's stock exchange earlier this month.

Also clamouring against austerity measures have been army pensioners, port workers, public university staff, and electricity company employees.

But the small Mediterranean country has promised donors to slash public spending as part of reforms to unlock $11 billion in aid pledged at a conference in Paris last year.

"Today we are sending a clear message to the international community and all donors committed to supporting Lebanon that we are serious" about economic reform, said Khall.

He added that the new budget would boost donor confidence and translate into development and infrastructure projects to help revive Lebanon's ailing economy.  

He did not detail austerity measures included in the budget, but they are expected to include a temporary hiring freeze in the public sector, a reduction of public sector benefits and pensions, and tax hikes.

Last week, the capital Beirut saw retired security personnel gather to demonstrate against feared pension cuts.

The draft budget still needs to be approved by parliament. 

House speaker Nabih Berri has said it could take up to a month for parliament to pass it, according to comments published earlier on Monday. 

Growth in Lebanon has plummeted in the wake of endless political deadlocks in recent years, compounded by the 2011 breakout of civil war in neighbouring Syria.

The country has been racking up public debt since the end of its own 1975-1990 civil war, which now stands at more than 150 percent of GDP, according to the finance ministry.