According to the latest figures by the Ministry of Finance (MoF), Lebanon’s fiscal deficit (cash basis) narrowed from $3B in H1 2018 to $2.42B in H1 2019. This was attributed to a 7.06% yearly drop in government expenditures to hit $7.52B. Meanwhile, fiscal revenues recorded a yearly increase by 1.75% to stand at $5.52B. Worth mentioning that the primary balance which excludes debt service posted a surplus of $730.70M, compared to a surplus of $217.41M during the same period last year.
Tax revenues (constituting 83.75% of total revenues) rose by an annual 1.26% to $4.63B by June 2019. Revenues from VAT” (24.31% of total tax receipts) dropped by 9.47% y-o-y to $1.12B. 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 number of new registered “commercial” and “passenger” cars lost an annual 24% to stand at 13,889 cars by June 2019. Meanwhile, “customs’ revenues” (13.52% of tax receipts) dropped by 5.75% year-on-year (y-o-y) to $625.55M. As for Non-tax revenues (16.25% of total revenues), they grew from 860.26M by June 2018 to $897.71M by June 2019. This can be linked to the yearly increase by 12.31% in “telecom revenues” (constituting 39.86% of total non-tax revenues) to reach $357.82M in H1 2019.
On the expenditures’ side, total government spending declined by a yearly 7.06% to hit $7.52B in the first half of the year. In details, transfers to Electricity du Liban (EDL) (15% of general expenditure) slid by 2.86% to reach $717.35M which followed the 7% annual decline in average oil prices to $66.17/barrel over the period. Moreover, total debt servicing (including the interest payments and principal repayment) reached $2.73B by June 2019, down by a yearly 5.21% such that interest payments alone dropped by 5.48% y-o-y to $2.63B. Interest payments on domestic debt declined by 8.10% y-o-y to $1.54B.Meanwhile, interest payments on foreign debt recorded also year-on-year a downtick by 1.49% to $1.09B.
In its turn, the treasury transactions (includes revenues and spending that are of temporary nature) posted a deficit of $421.78M, compared to $372.81M by June 2018. In details, treasury expenses of which municipalities dropped from $443.21M to $275.43M over the same period noting that the government released overdue funding to municipalities in the following months.
Yearly Fiscal deficit by June (in $M)
Source: Ministry of Finance