6 May 2019; MEMO: Lebanese central bank employees went on strike on Monday over state budget proposals that would cut their benefits but said they may be ready to take a decision to “relieve” pressures caused by the move, reports Reuters.
The strike prompted the Beirut Stock Exchange to suspend trading until further notice because the clearance and settlement process for transactions could not be done on time, it said in a statement.
Saddled with one of the world’s heaviest public debt burdens, the government is debating a draft 2019 budget the prime minister has said may be the most austere in Lebanon’s history. Druze leader Walid Jumblatt threw his weight behind the plan on Monday, calling it “better than suicide”.
The public sector wage bill is the government’s biggest expense, followed by the cost of servicing the public debt.
Prime Minister Saad al-Hariri warned in a statement earlier of “legal consequences” for strikers who jeopardised work at state institutions.
A decision on the central bank workers’ next step would be taken at their general assembly meeting on Tuesday, Abbas Awada, head of their syndicate, said in an interview with the broadcaster al-Jadeed.
He said there had been negative effects from the move and pressure “on the market, on the governor of the central bank, and on all Lebanese”.
“A positive decision” may be taken to “facilitate matters”, he said, but added that if the government approved the budget without addressing their concerns “we will proceed in an open strike”.
Central bank governor Riad Salameh convened a meeting with central bank employees where it was agreed to open Lebanese pound pricing operations against foreign currencies and to reopen financial transfers, the state-run National News Agency reported. The pound is pegged against the U.S. dollar.
Salameh opposed the strike action and had asked for it to be lifted, Awada said.
Marwan Mikhael, Chief economist of Lebanese investment bank Blominvest, said banks retain access to liquidity through the interbank market, but cheque clearing operations had stopped.
“It will have an impact eventually, but I think for the short term it will be fine,” he said.
Finance Minister Ali Hassan Khalil has said the draft budget involves “wide reductions” in spending based on the need for “exceptional austerity measures”.
The draft budget proposals include annulling performance-linked bonuses paid in some state-run institutions, including the Central Bank. In some cases, these have amounted to several months extra salary a year.
Khalil also said the government insisted on raising the tax rate on interest payments to 10 per cent from 7 per cent, saying this was a fundamental part of the draft budget.
The banking association chairman last week warned that the proposed hike in the tax on interest income would affect capital flows to Lebanon, weaken banks’ ability to play their financing role in the economy, and obstruct growth.
Interest income had been tax-free until the government introduced the 7 per cent levy last year.
