Lebanon’s 2026 Budget: Fiscal Performance and the Impact of War Escalation

Lebanon’s Q1 2026 fiscal position showed strong revenue growth—driven by VAT collections, higher non‑tax income, and revised excise duties on fuel and beverages—offsetting the impact of public sector salary hikes and expanded treasury spending. As a result, the primary balance surged 41% compared to Q1 2025. Yet this quarterly surplus masked a sharp deterioration in March, where Israel’s hostilities on Lebanon, along with the Middle East war, triggered a primary deficit of LBP 2,857 billion and a total deficit of LBP 4,205 billion. The reversal was fueled by a 145% year over year (YoY) surge in expenditure, led by doubled personnel costs and a rise in Budget advances, Capital Expenditures and Treasury expenditures.

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