March 12, 2019The Government Monitor No.1: The Government’s Ministerial Statement Adopts CEDRE
As part of its mission to promote citizens’ welfare and place their concerns at the center of the Lebanese Government’s agenda, LCPS has undertaken a new project focused on monitoring the cabinet’s work. Throughout this endeavor, LCPS will evaluate the Council of Ministers’ work, inform key stakeholders of its research findings, and seek to influence decision makers by advocating for the implementation of national policies that address citizens’ needs.
WHAT IS THE ISSUE AT HAND?
On 15 February 2019, 111 of the 128 MPs in the Lebanese Parliament gave the newly formed government their vote of confidence. Although the government’s ministerial statement (MS) is based on the key pillars of CEDRE, around 50% - 36 out of 73 - of the promised measures in the CEDRE document1 are explicitly stated in the MS.
The government has prioritized governance and fiscal reform measures over sectoral ones. The government adopted most measures related to governance (8 of the 11 CEDRE governance measures), more than half of CEDRE fiscal measures (13 of the 23), and two of the four private sector development measures, while only 13 out of 32 CEDRE measures in sectoral policy areas were included and none of the judiciary reforms were adopted.
GOVERNANCE: The MS includes freezing recruitment in the public sector, reforming the pensions system, and adopting a government digitization strategy, which are part of the CEDRE measures. Although the government intends to adopt the Office of the Minister of State for Administrative Reform’s anti-corruption strategy, the MS does not mention passing the law for the establishment of a National Anti-Corruption Commission—part of CEDRE and drafted in December 2018.
FISCAL: The MS adopts measures such as reducing the government’s transfers to EdL, improving public debt management, and improving tax collection, but excludes increasing VAT. However, it addresses revenue enhancement in more detail than the reform program—including expanding the tax base and fighting tax evasion.
PRIVATE SECTOR DEVELOPMENT: The MS mentions transforming the Beirut Stock Exchange into a shareholding company and launching an electronic trading platform. One measure that was excluded is modernizing the legal status of businesses based on the parliament’s review of the Code of Commerce, while another CEDRE measure—the adoption of the e-transaction and protection of personal data law—was completed in September 2018.
SECTORAL/JUDICIAL: While most of the electricity-related reform measures are included in the MS, measures related to transportation2 and judicial reforms are not mentioned.
WHY IS THIS IMPORTANT?
$10 billion of the $11 billion pledges made at CEDRE are concessional loans, conditioned upon fiscal, structural, and sectoral reforms to which the government expressed its commitment at the conference.
The loans will finance a series of infrastructure projects which are considered an urgent necessity for economic development. Yet, the projects could not be financed without international support given prevailing high levels of public indebtedness, a regressive tax regime, and poor tax collection3.
BACKGROUND
After nine months of deadlock, the formation of the government removed a major obstacle to receiving the loans pledged by the international community at CEDRE. The loans are slated to finance the government’s Capital Investment Program (CIP) which consists of 271 infrastructure projects.
The government’s MS, revealed on February 7, 2019, outlined the government’s main goals and commitments for its mandate. The statement included a number of measures that were mentioned in the reform program presented at CEDRE.
1 The CEDRE document is officially referred to as the “Vision for Stabilization, Growth and Employment”.
2 While reforms in the transport sector were excluded from the “Vision for Stabilization, Growth and Employment” they were stated in the “Capital Investment Program Report”, a separate CEDRE document.
3 Mahmalat, M. and S. Atallah. 2018. “Why Does Lebanon Need CEDRE? How Fiscal Mismanagement and Low Taxation on Wealth Necessitate International Assistance.” Lebanese Center for Policy Studies. Policy Brief.
