The fiscal balance of Lebanon, an oil-importing economy, managed to record a larger primary surplus and a smaller deficit in 2017 even though international oil prices rose to an average price of $54.73 per barrel compared to $45.13 in 2016. In addition, optimism accompanied the election of a new president, which enabled the Lebanese authorities to pass a series of long-awaited laws.
However, the improvement is temporary, and the IMF’s latest concluding statement explained, “[…] higher personnel and interest costs will be main contributors to further deteriorating fiscal position over the projection horizon. […] A fiscal consolidation plan with front‑loaded fiscal adjustment, embedded in a credible budget, is urgently needed.”
The study aims to delineate the changes in government income and spending over the year, shed light on the movement in key accounts, and explain the “short-lived” nature of the improvement in the Lebanese fiscal balance in 2017, noting that the government recorded a “one-off tax windfall” from national banks and approved a new salary scale expected to exceed estimated costs – all within an environment of subdued growth and rising interest rates.
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Lebanon’s Fiscal Performance in 2017: Short-lived Improvement