BEIRUT: For the first time since 2006, Lebanon recorded a primary deficit after the Cabinet of Prime Minister Najib Mikati raised the salaries of civil servants and military personnel at the beginning of 2012.
According to the 2012 budget figures issued Monday, the country recorded a primary deficit of LL166 billion ($110 million) in the first 12 months of 2012 compared to a surplus of LL2.505 trillion in the same period of 2011.
Salaries and end-of-service indemnities represent nearly 40 percent of the government’s total expenditures each year but the decision to raise the wages for both private and public sector employees had negative effects on the economy.
Effectively, employees have received an increase ranging from LL175,000 for those earning the minimum monthly wage, up to LL299,000 for salaries above LL1.5 million.
The Finance Ministry said in its last report on the wages of the government employees that salaries and related benefits payments, which mainly include the cost of basic salaries, indemnities and allowances, increased by LL701 billion from LL2.920 trillion in Jan-Oct 2011 to LL3.621 trillion in Jan-Oct 2012.
The ministry added that as a result of this increase, the budget deficit surged to 29.47 percent (LL5.918 trillion) in the first 12 months of 2012 compared to a deficit of 20.05 percent (LL3.530 trillion) in the same period of 2011.
The government’s total revenues in the first 12 months of 2012 reached LL14.164 trillion, an increase of LL93 billion compared to the same period of 2011, the Finance Ministry said.
The statement added that the revenues from the Customs department for all of 2012 rose by LL72 billion, or 3.32 percent.
Revenues from value added tax fell only by 0.72 percent to reach LL3.275 trillion at the end of 2012.
Non-tax revenues such as proceeds from the telecoms sector also fell by 5.25 percent to reach LL3.285 trillion.
But the government’s total expenditures at the end of last year surged by 14.10 percent to LL20.481 trillion compared to LL17.600 trillion of spending in 2011.
The figures released by the Finance Ministry also showed a substantial increase in the deficit of Electricite du Liban at the end of 2012.
The ministry said the allocations to EDL soared by 29.8 percent to reach LL3.408 trillion at the end of 2012.
Experts attribute this increase to the high cost of fuel oil.