Lebanon’s fiscal deficit (cash basis) narrowed from $378.91M in January 2018 to $72.83M in January 2019. This was attributed to a 16.09% yearly decrease in government expenditures to hit $1.10B, while the fiscal revenues recorded a yearly increase by 8.45% to stand at $1.08B. The primary balance which excludes debt service posted a surplus of $231.74M, compared to a deficit of $106.34M in January 2018.
Tax revenues (constituting 83.40% of total revenues) declined by an annual 1.13% to $902.51M in January 2019. Revenues from VAT” (33.84% of total tax receipts) dropped by 16.12% y-o-y to $305.40M. In fact, although the new VAT rate of 11% was applied in beginning of January 2018 increasing from 10%, the decrease in the VAT revenues can be linked to the stagnating economy and recession in many sectors. In the car sector for example the VAT payment is done after the car registration. However, according to the Association of Lebanese Car Importers, the total number of newly registered commercial and passenger cars fell by 26.10 % year- on- year (y-o-y) to 1,948 cars in January 2019. Meanwhile, “customs’ revenues” (11.79% of tax receipts) dropped by 6.49% year-on-year (y-o-y) to $106.38M. As for Non-tax revenues (16.60% of total revenues), they witnessed a significant increase from 84.92M in January 2018 to $179.57M in January 2019. This can be linked to the yearly rise in “telecom revenues” (constituting 46.31% of total non-tax revenues) to reach $83.17M in January 2019.
On the expenditures’ side, total government spending retreated by a yearly 16.09% to hit $1.10B in January 2019. In details, transfers to Electricity du Liban (EDL) alone dropped by 26.17% to reach $65.85M which followed the 12.78% annual decline in average oil prices to $60.24/barrel over the period. Moreover, total debt servicing (including the interest payments and principal repayment) reached $304.57M in January 2019, up by a yearly 11.74% such that interest payments alone rose by 12.77% y-o-y to $287.34M. Interest payments on domestic debt grew by 14.27% y-o-y to $245.51 following the increase in interest rates on treasury bills in November 2018. Meanwhile, interest payments on foreign debt rose by an annual 4.69% to $41.83M.
In its turn, the treasury transactions posted (includes revenues and spending that are of temporary nature) a deficit of $50.10M, compared to $59.96M in January 2018. In details, treasury expenses of which municipalities dropped from $274.60M to $20.08M over the same period noting that the government released overdue funding to municipalities in the following months.
Yearly Fiscal Balance by January (in $M)
Source: Ministry of finance