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Lebanon fiscal deficit drops 69.1 percent in first two months

14 April 2010

BEIRUT: Figures released by the Finance Ministry reveal that public finances in the first two months of 2010 exhibited an improvement relative to the same period of 2009, caused mainly by a significant decrease in total payments along with a slight improvement in total revenues, with the overall budget deficit accounting for 12.0 percent of overall expenditures, relative to 31.7 percent in the first two months of 2009 as reported by Bank Audi’s Lebanon Weekly Monitor. The total deficit of February 2010, which amounted to LL265.3 billion ($177 million), contributed to increase the deficit prevailing at end-January, leading to a total global deficit of LL292.0 billion in the first two months of 2010. However, the deficit of this year’s first two months decreased significantly when compared to the deficit of LL943.5 billion in the first two months of 2009, thereby exhibiting a 69.1 percent yearly decline.

The aforesaid decrease mainly results from an increase in revenues, a reduction in transfers to Electricite du Liban (EDL) , and a small decrease in public debt servicing.

On the income front, public revenues which include budget and Treasury receipts, increased by 5.1 percent relative to the same period of 2009, thereby reaching LL2,136.4 billion in the first two months of 2010. Treasury receipts registered a rise from LL94.0 billion to LL125.1 billion. The increase in Treasury receipts was mainly driven by a 55.5 percent growth in guarantees received.

As to budget revenues, they edged up by a 3.8 percent to reach LL2,011.4 billion, driven by a rise in tax revenues.

Total tax revenues increased by 11.2 percent, due to a year-on-year rise of 9.4 percent in VAT revenues, indicating amelioration in aggregate private consumption, as well as an increase in other tax revenues that went up by 19.9 percent on a yearly basis. The latter taxes incorporate income tax revenues, property registration fees as well as excise revenues.

Custom revenues grew by only 2.9 percent over the first two months of 2010 compared to the same period of last year, reflecting a slight rise in receipts from international trade. As for non-tax revenues, they went down by 14.9 percent.

On the spending side, total public expenditures, which include budgetary and Treasury spending, decreased by a yearly 18.4 percent in the first two months of 2010 to reach LL2,428.4 billion, caused mainly by a 51.9 percent decline in Treasury expenditures. Treasury expenditures reached LL524.1 billion in the first two months of 2010, and their decrease is mostly due to a decline of LL318.5 billion, or 47.1 percent in transfers to EDL , which totaled LL357.6 billion.

This item constituted the largest share of Treasury expenditures, as it accounted for 68.2 percent of spending.

The aforementioned decrease could be attributed to the fact that the government is rationalizing its EDL -related expenditures. In parallel, budgetary expenditures remained almost unchanged at LL1,904.3 billion in the first two months of this year, up by 1.0 percent from the corresponding period last year.

This result was due to the fact that the increase in noninterest expenditures was offset by an almost equal decrease in interest payments. Interest payments on domestic and foreign debt, registered a total of LL761.4 billion in the first two months of 2010, down by 3.7 percent relative to the same period of 2009.

This decline was spurred by a year-on-year decrease of 12.2 percent in interest payments on foreign currency debt and a decline of 1.2 percent in interest payments on domestic currency debt. As for principal foreign debt repayment, it amounted to LL19.4 billion in the first two months of 2010, up from LL18.6 billion recorded in the first two months of 2009. Non-interest budgetary spending went up by 4.3 percent year-on-year.

As such, with the combination of a decrease in spending and a rise in revenues, the public balance saw a year-on-year decrease in the first two months of 2010, as the global deficit went down by 69.1 percent, and reached LL292.0 billion.

When excluding debt service, the first two months of the year witnessed a significant improvement at the level of the primary balance, which registered a surplus of LL488.8 billion, compared to a deficit of LL134.1 billion in the first two months of 2009, mirroring the decrease in non-debt related expenditures. – The Daily Star

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