Abstract
By 2016, the Syrian Crisis was in its fifth year. Lebanon recorded climaxing political, economic, and regional vulnerabilities, which constituted a direct impediment to economic growth. During the year, the continued global slump in oil prices was a “temporary” advantage for an oil-importing economy like Lebanon. October 2016 also carried a positive, needed breakthrough for Lebanon, as the two-and-a-half year political deadlock was released with the election of a new president, and shortly afterwards, the formation of a new cabinet. However, in reality, the country’s fiscal deficit as well as its primary surplus continued deteriorating through 2016, coupled with exacerbated debt metrics. On the long-run, the financial, fiscal, and economic woes risk tarnishing the government’s credibility vis-à-vis foreign investments and expatriates’ remittances, both of which are crucial to the dynamics of the Lebanese economy. Therefore, 2016’s fiscal performance calls again for fundamental reform of national policies and a draft national budget, to help dilute the tax revenues debilitated by the Syrian Crisis and tighten the belt on current spending while enhancing capital expenditures to secure long-term growth.
Public finance: General Overview
Lebanon’s overall Fiscal Deficit Widened by 25.09% in 2016. According to the Ministry of Finance, Lebanon’s fiscal balance was exacerbated in 2016, with the deficit climbing by a yearly 25.09% to LBP 7,453B ($4,944M). The year carried multi-faceted developments, namely the ongoing regional repercussions of the Syrian crisis and the national election of a new president for Lebanon in October 2016. The World Bank’s April 2017 Lebanon economic outlook report also confirmed that progress on fiscal reforms in the past year was absent. The growth in the fiscal deficit came on the back of a 9.9% increase in expenditures, which outpaced the 3.63% uptick in total government revenues.
Lebanon remains a marginally growing economy and this capitalizes on its “frail” macro-fiscal framework. The World Bank reiterated in April 2017, “Lebanon [i]s the largest host (on a per capita basis) for displaced Syrians”. The presence of Syrian refugees coupled with the absence of urgent structural reforms on government revenue and/or spending in 2016 inflated expenses and provoked the swelling of the fiscal deficit.
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