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The Daily Star
THURSDAY, 24 APR 2014
01:53 AM Beirut time
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Deficit could reach 37 percent of spending
Caretaker Finance Minister Mohammad Safadi.
Caretaker Finance Minister Mohammad Safadi.
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BEIRUT: Lebanon’s budget deficit could rise to 37 percent of spending in 2014 if drastic reforms are not carried out and the Syrian conflict continues unabated, economists said Thursday.

“Part of the drop in revenues and alarming rise in expenditures is due to the presence of the Syrian refugees in Lebanon,” economist Ghazi Wazni told The Daily Star. “This presence has prompted the ministries to increase allocations to heath, education and social welfare services this year. The deficit could be more than 37 percent next year.”

Wazni was commenting on the Finance Ministry’s budget deficit figures for the first 10 months of this year, which soared to 30.76 percent (or $3.56 billion), compared to 24.84 percent in the same period of 2012.

He added that the influx of Syrians in Lebanon was one of the major causes of the worsening conditions at the Finance Ministry.

Caretaker Finance Minister Mohammad Safadi said the Finance Ministry had to spend an additional $900 million this year to cope with the influx of refugees in Lebanon, warning that the public finances would come under further pressure next year if the issue of the refugees was not addressed effectively.

The minister did not hide his disappointment at the weak response of donor states to the spillover of the Syrian war into Lebanon, noting most of the countries clearly stated that financial aid would only come if a new Cabinet was formed.

But Nassib Ghobril, the head of economic research at Byblos Bank, said the presence of the Syrian refugees was not the only reason behind the rise in the budget deficit this year.

“The problem is that this [caretaker] Cabinet has overspent on current expenditures instead of capital investments. The other problem is that the authorities did not improve tax collection nor put an end to tax evasion,” Ghobril argued.

Both Wazni and Ghobril feared that the budget deficit could exceed the figures of 2013 if new measures were not implemented soon.

Safadi recently projected that the public debt could rise to $4 billion in 2014, but the economists believe that the debt could be even higher.

Ghobril stressed that formation of a national unity Cabinet might not be sufficient to solve the financial crisis in the country.

“We had several national unity Cabinets before and they all failed to implement reforms and put a lid on spending. We need to send a strong signal to the international community that we are serious about reforms,” he said.

According to the Finance Ministry, total government revenues up to October of this year stood at LL11,251 trillion, compared to LL11,941 trillion in the same period of 2012, a drop of 5.77 percent.

Total spending in the same reporting period reached LL17.245 trillion compared to LL16.242 trillion in 2012, an increase of 6.18 percent.

 
A version of this article appeared in the print edition of The Daily Star on December 27, 2013, on page 5.
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