Lebanon's budget deficit soars
Lebanon’s budget deficit in the first eight months of 2012 surged to LL2.245 trillion ($1.49 billion), or 18.48 percent of spending, compared to LL1.471 trillion, or 13.51 percent, in the same period of last year, the Finance Ministry said Friday.
The primary surplus, excluding the cost of debt servicing, also fell by 9.77 percent to LL1.187 trillion in the same reporting period.
Government revenues through August reached LL9.904 trillion, an increase of 5.12 percent compared to the same period of last year.
The ministry noted that revenues collected from value added tax in the first eight months surged by 5.29 percent to reach LL2.299 trillion while proceeds from Customs rose by 4.43 percent to reach LL1.489 trillion.
The revenues figures show that the government was able to reap some benefit from the surge in the volume of imports up to August of this year.
Telecoms revenues,which represent a third source of income for the government, fell slightly by 1.68 percent to LL1.424 trillion.
Telecoms revenues are expected to reach $1.5 billion at the end of 2012, including both the land line and cellular networks.
But the rise in government spending was the main reason behind the surge in the budget deficit in first eight months of this year.
According to the Finance Ministry, the government expenditures rose by 11.53 percent to reach LL12.149 trillion compared to LL10.893 trillion last year.
Current spending, such as the salaries of civil servants and army and security personnel, rose to LL8.717 trillion up to August compared to LL7.153 trillion in the same period of last year, registering an increase of LL1.564 trillion.
Government allocations to the cash strapped Electricite du Liban surged considerably by 61.88 percent to reach LL2.171 trillion compared to LL1.341 trillion the first eight months of 2011.
Finance Minister Mohammad Safadi earlier estimated EDL’s deficit at the end of 2012 to reach $2 billion if no action is taken to reduce the losses.
Safadi and all economists have been trying in vain to reduce the losses of the electricity sector but to no avail.
Experts say that the cost of fuel oil represents nearly 80 percent of the total losses at EDL.
Apart from current spending, the cost of debt servicing through August was LL3.423 trillion, compared to LL3.740 trillion last year.
The ministry recently succeeded in issuing $1.525 billion of bonds with low yields and this has allowed the treasury reduce finance costs.
Bankers said that the government can save up to $500 million if the yield on Eurobonds fell by 1 percent.
However, economists warned the government that if it insisted on endorsing the salary scale the budget deficit would rise by $1.2 billion a year.
It is still not clear whether the Cabinet will be able to bow to the pressures of school teachers and labor unions to increase the salaries of the public sector before the parliamentary elections in June.