According to Ministry of Finance (MoF) latest figures, Lebanon’s fiscal deficit (cash basis) stood at $2.2B by June 2020, down from last year’s $2.4B.
In detail, the substantial deficit is attributed to the annual 19.81% drop in government revenues (including treasuries) which fell to $4.61B by June 2020. On the counterpart, total expenditures (including treasuries) retreated yearly by 16.34% to $6.84B in the first half of the year. Worth mentioning that the primary balance which excludes debt service posted a deficit of $876.21M, compared to a surplus of $308.93M during the same period last year.
Fiscal revenues recorded a yearly downtick of 28.20% to stand at $3.96B. Tax revenues (constituting 84.05% of total revenues) retreated by an annual 27.94% to $3.33B by June 2020. Revenues from VAT (16.93% of total tax receipts) dropped by 49.81% y-o-y to $564.43M. The drop in “VAT revenues” is most probably attributed to the low growth environment and reduction in spending, thus limiting income for the government of Lebanon. Meanwhile, “customs’ revenues” (12.69% of tax receipts) dropped by 32.36% year-on-year (y-o-y) to $423.15M. It is worth mentioning that the “Real Estate registration fees” constituted 7.31% of the tax revenues and accounted for $243.57M in the first six months of 2020. In details, the total number of real estate transactions climbed by an annual 24% to 27,216 in H1 2020. Moreover, the value of the performed transactions increased to reach a 3-year high of $5.4B by June 2020, up from 2019’s $2.7B.
As for Non-tax revenues (15.95% of total revenues), they dropped from $897.71M by June 2019 to $632.62M by June 2020. Meanwhile, “Telecom revenues” (constituting 31.46% of total non-tax revenues) shrunk yearly by 44.38% to reach $199M by H1 2020.
On the expenditures’ side, total government spending recorded a yearly drop by 19.71% to hit $6B by June 2020. In details, transfers to Electricity du Liban (EDL) (9.2% of general expenditure) slid by 39.55% to reach $433.61M. Moreover, total debt servicing (including the interest payments and principal repayment) reached $1.35B by H1 2020, down by a yearly 50.61% such that interest payments alone retreated by 51.54% y-o-y to $1.27B. In details, interest payments on domestic debt slumped by 26.12% y-o-y to $1.14B. Meanwhile, interest payments on foreign debt registered a year-on-year significant drop by 87.60% to $134.90M noting that on March 7 2020, the Lebanese government announced for the first time that Lebanon will not pay a $1.2B Eurobond due on March 9 and will seek to restructure its sovereign foreign currency debt.
In its turn, the treasury transactions (includes revenues and spending that are of temporary nature) posted a deficit of $151.18M compared to a deficit $421.78M by June 2019.
Yearly Fiscal deficit by June (in $M)
Source: MOF, BlominvestBank