BEIRUT: The Finance Ministry Monday projected GDP growth in Lebanon at 2.5 percent in 2011 and 4 percent the following year.

The projections were part of the 2012 draft budget which caretaker Finance Minister Raya al-Hasan prepared.

The new draft budget still needs the approval of the Cabinet and the Parliament but this seems highly unlikely as a new government has yet to be formed four months after the resignation of the Saad Hariri’s Cabinet.

The ministry noted that the draft budget would be transparent and all development projects would be completed to meet citizens’ priorities.

According to the draft budget, government spending will fall from 29.2 percent in 2012 to 27.7 percent in 2014.

Projected revenues for 2012-14 are estimated at 23 percent of the country’s GDP.

The deficit-to-GDP ratio will be reduced in the total budget from 6.9 percent in 2012 to 5.1 percent in 2014.

Primary surplus, excluding the cost of debt servicing, will rise to 2.5 percent in 2012 and to 4.1 percent in 2014.

The Finance Ministry said the new draft budget would not include any reforms because this decision was up to the next Cabinet.

Analysts and economists argue that it is very unlikely that the new Cabinet, which will be headed by Prime Minister-designate Najib Mikati, will adopt the new draft budget.

The new finance minister is expected to be caretaker Economy and Trade Minister Mohammad Safadi, who will probably continue most of the policies adopted by his predecessors but may make some modifications.

“The objective of the 2012 budget is to continue the goals set in the 2010 and 2011 budget by implementing development projects and fulfilling the needs of the citizens,” the report said.

Other objectives in the new budget include preserving the financial and monetary stability and reducing the burden of debt servicing.

These measures, according to the report, will enable the next Cabinet to reduce the budget deficit and this would secure additional financial resources that will be earmarked for development projects.

But the summary of the draft budget does not explain how the next government will secure more revenues and cut spending in the coming few years.

The 2010 budget was modified many times during heated Cabinet sessions last year as caretaker Telecomunications Minister Charbel Nahhas insisted on dropping all types of taxes such as a planned increase of the Value-Added Tax (VAT).

Among the biggest challenges facing the new Cabinet is financing the public debt, securing funds for development projects and reducing the budget deficit.

A quick look at the budget deficit statements in the past three months shows the deficit is rising to alarming levels as a result of the absence of a government, slow economic growth and a fall in state revenues.

The Finance Ministry said last week that the budget deficit in the first three months of 2011 rose by LL794 billion ($529.3 million) while the primary surplus in the same period registered a deficit of LL218 billion.

The ministry attributed the high deficit to a sharp fall in government revenues and an increase in spending.

According to the Finance Ministry’s monthly bulletin, the budget deficit up to March 2011 reached 37.76 percent of spending or LL1.655 trillion, an increase of LL794 billion.

The deficit in the first three months of 2010 reached LL861 billion or 21.83 percent of spending.

The primary surplus, excluding the cost of debt servicing, recorded a deficit of LL218 billion, compared to a surplus of LL582 billion in the same three months of 2010.

Total state revenues in the first three months of 2011 reached LL2.728 trillion, or a drop of LL356 billion compared to the same period of 2010.

The table provided by the Finance Ministry showed customs revenues up to March 2011 reached LL536.374 billion, a drop of 19.08 percent compared to the same period of 2010. Proceeds from the VAT stood at LL775.087 billion in the first three months, a drop of 0.61 percent in the same period of 2010.

Non-tax revenues such as revenues from the telecoms sector stood at LL305 billion, compared to LL566.691 billion in the same period of last year, a decrease of 46.12 percent.

Total government spending in the same reporting period reached LL4.383 trillion, compared to LL3.954 trillion in the same period of 2010, an increase of 11.09 percent.

Lebanon Hires HSBC, Byblos for $1.13 Billion Refinancing

LONDON: Lebanon hired HSBC Holdings Plc, Byblos Bank SAL and Fransabank SAL as lead managers to refinance $1.13 billion in eurobonds, according to two sources familiar with the matter.

The mandate will be signed by Tuesday, said the sources, who declined to be identified because details of the transaction have not been made public.

Lebanon had asked 20 banks for proposals to refinance the eurobonds maturing this month as borrowing costs decline and the Central Bank keeps interest rates low, caretaker Finance Minister Raya al-Hasan said in an interview on April 29.

Alain Wanaa, head of the group financial markets division at Byblos Bank, declined to comment. Nadim Kassar, the general manager at Fransabank, was not reachable for comment when contacted at his office. No one at HSBC’s office was immediately able to comment.

Lebanon’s public debt, which it accumulated while rebuilding the country after a 15-year civil war ended in 1990, was at $52.6 billion at the end of last year. The outgoing government said debt will rise to $55.3 billion this year, or about 129 percent of gross domestic product. The debt-to-GDP ratio has fallen from a high of 180 percent at the end of 2006.

About $3.3 billion of eurobonds are due this year, including interest payments, the Finance Ministry said in August. The next eurobond matures in August.