02 July 2009

BEIRUT: Lebanon's budget deficit continued to rise as a result of mounting government spending and amid signs that there is no imminent solution for the country's chronic public debt. According to the report by the Finance Ministry on Wednesday, the fiscal deficit in the first five months of the year rose by LL2.122 trillion or $1.41 billion up to May of 2009 compared to a deficit of LL2.050 trillion in the same period of last year.

This translates into a deficit of 29.14 percent of spending.

The ministry said that spending on the electricity sector in the same reporting period rose by LL353 billion compared to the first five months of last year.

The government has been subsidizing the high cost of fuel oil that runs most of the country's power stations since 1995.

The losses incurred by stated owned Electricite du Liban (EDL)Electricite du Liban (EDL) is literally draining the limited resources of the treasury.

Despite repeated pledges by successive governments to tackle the problems of EDLEDL, the electricity sector remained one of the biggest obstacles to real reforms in the country.

The International Monetary Fund and the World Bank have repeatedly urged the Lebanese government to adopt radical measures to reduce the losses of EDLEDL.

Outgoing energy and water minister Alan Tabourian presented a plan to improve the production of power stations in the country over the next five years. But the minister says that Prime Minister Fouad Siniora has shelved his plan and refused to discuss it in the Cabinet. Experts argue that Lebanon should find cheaper sources of energy and abandon the use of fuel oil and gas oil because they are too expensive and pose a threat to the environment.

The primary surplus, excluding the cost of debt servicing, rose to LL344 billion up to May of this year compared to surplus of LL249 billion in the first five months of 2008. Total government revenues up to May of this year reached LL5.161 trillion, an increase of 27.18 percent compared to the same period last year.

Total government expenditures in the same reporting period reached a whooping LL7.283 trillion, an increase of 19.23 percent.

The statement said that value added tax revenues up to May rose to LL1.202 trillion up to May of this year compared to LL1.015 trillion in the same period of last year. Non tax revenues, including the telecom sector, also rose to LL1.414 trillion from LL1.075 trillion.

Economists and bankers fear that the public debt will easily climb to $52 billion at the end of 2009 if no drastic action is taken to stop the climb of this debt.

But Siniora and officials ruled out the possibility of any privatization of the cellular networks this year due to unfavorable market conditions.

The designation of MP Saad Hariri as the next prime minister of Lebanon has relievedthe local market which was concerned that the opposition may delay Paris III reforms if it won the June 7 parliamentary elections.

However, it is difficult to say wether Hariri will be able to form the cabinet in the coming few weeks.

There is also concern that the opposition ministers may put tough conditions on any attempt to fix the fiscal deficit through privatization or even new taxes. - The Daily Star

 

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