Lebanon’s cash-basis fiscal deficit narrowed from $4.73B by October 2018 to $4B by October 2019. The smaller deficit comes as a result of the 7.63% yearly decline in government spending, which outweighed the 3.17% annual retreat in total public revenues. In fact, total government revenues and expenditures (including treasuries) stood at $8.94B and $12.35B, respectively. In its turn, the primary balance which excludes debt service, posted a surplus of $218.17M over the same period, compared to a deficit of $401.59M by October 2018.
The breakdown of the fiscal performance of the Lebanese government in the first 10months of 2019 showed that Tax revenues (constituting 80.42% of budget revenues) decreased by 4.05% year-on-year (YOY) to $7.19B by October 2019, of which VAT revenues (25.70% of total tax receipts) dropped by 19.32%YOY to $1.85B. The drop in VAT revenues is most probably attributed to the low growth environment and the ensuing reduction in spending since the beginning of the year, which outweighed the positive effect of raising the VAT rate from 10% to 11% effective January 2018. For example, revenues from the Lebanese Customs (14.39% of total tax receipts) decreased by an annual 8.99% to stand at $1B by October. 2019.
In turn, Non-tax revenues (19.58% of total revenues) registered an annual uptick of 0.61%YOY to $1.75B by October 2019, despite a 0.47%YOY downtick in Telecom revenues (45.57% of Non-tax revenues) to $797.49M over the same period.
On the expenditures side, Total government expenditures fell by a yearly 7.63% amounting to $12.35B in the first 10months of 2019. In details, Transfers to Electricite du Liban (constituting 10.6% of total public expenditures) fell by an annual 5.24% to stand at $1.31B. The decrease can be affiliated to an 11%YOY drop in the average international oil prices to $64.75 per barrel in Q3 2019. Meanwhile, Total debt-servicing (inclusive of interest payments and principal repayments) fell by 2.09%YOY to $4.24B by Oct. 2019. Notably, interest payments on domestic debt (63.5% of total interest payments) slid by a yearly 2.16% to $2.60B, while interest payments on debt denominated in foreign currency slipped by 1.89%YOY to $1.50B.
Treasury transactions in their turn (inclusive of revenues and spending that are of temporary nature) posted a deficit of $613.32M by October 2019, compared to $595.64M in the same period last year. In fact, treasury expenses of which Municipalities, slumped by 13.15% annually, to stand at $474.28M over the same period.
Yearly Fiscal deficit by October (in $M)
Source: Ministry of Finance