Lebanese Parliament Approves 2022 Budget with an Estimated Deficit of 11 T LBP

The 2022 budget prepared by MOF envisaged total expenditures of 47.32 T LBP and total revenues of 39.11 T LBP with a deficit of 8.21 T LBP. The budget was viewed as an emergency budget that would set the stage for reforms and the agreement with the IMF. In fact, it is one of the pre-conditions for the IMF agreement to be approved by the Executive Board. It was also based partly on an exchange rate of 20,000 LBP to the USD, including the customs dollar. Other details include expenditures to be divided as follows: 18.3% on wages and salaries; 30.18% on social expenditures; 10.08% on debt service; 34.79% on other current expenditures; and 6.65% on capital expenditures. And expenditures do not include transfers to EDL. As to revenues, it is estimated that 32.91 T LBP would be tax revenues.

Upon discussion by Parliament on 26/9/2022, the new budget that was approved and became a law assumed expenditures of 40.87 T LBP and revenues of 29.98 T LBP with an estimated deficit of 10.98 T LBP. Prior to approving the budget, some MPs argued that after accounting for the 2-times increase in the wages and salaries of public sector employees  and retirees , the deficit should rise to 16 T LBP. But the MOF countered that revenues from the Ministries of Communications and Public Works are expected to bring additional revenues of close to 6-7 T LBP, primarily from port and airport revenues priced in dollars and communication revenues priced at Sayrafa. It was also approved that the customs dollar – and perhaps the exchange rate to be applied on some transactions – will be 15,000 LBP to the USD.

Overall, there is still considerable uncertainty as to what the exact figures for expenditures and revenues will be, as the budget seems to have been hastily approved and not enough clarity was provided regarding the applicable exchange rates. One thing is for sure, is the budget deficit — whether at 11 T LBP or more — was to be financed primarily by BDL through the printing of money with no sterilization operations done parallel to that, then the impact of the deficit on inflation and the exchange rate will be hugely negative.

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