Lebanon’s parliament passed the 2022 budget on Monday using an exchange rate for customs tax revenues that lies far below the market value of the Lebanese pound, falling short of economic reform measures that would pay the way for an IMF deal.
An agreement with the lender of last resort is seen as a first crucial step for Lebanon to begin exiting a three-year financial implosion that has left most people poor and plunged the country into its worst crisis since the 1975-90 Civil War.
An April staff-level agreement between Lebanon’s government and the International Monetary Fund called on authorities to increase revenues to fund the crippled public sector and allow for more social spending by calculating customs taxes at a “unified exchange rate”.
But parliament endorsed a rate of 15,000 pounds to the dollar.
The market rate sat at around 37,000 pounds on Friday.
Officials view the approval of a higher exchange rate for imports as a move that would be unpopular with their constituencies in the heavily import-dependent country.
The budget – adopted with just three months left in the year – calculated expenditures at 41 trillion Lebanese pounds, or $1.1 billion at the market rate on Monday, and revenues at 30 trillion Lebanese pounds.
It tripled salaries for all public sector workers, including the army and security forces, many of whom now earn less than $50 due to the depreciation of the Lebanese pound by more than 95% since 2019.