Subsidies, Economic Update, Social Safety Net

Lebanon’s Fiscal Challenges: Debates Over Budget Deficit

12:21 | 31 August 2023LIMS output
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Budget

The caretaker government has granted approval for the 2023 budget and is expected to start examining 2024 budget. In a departure from tradition, the 2024 budget may mark a timely submission, signaling a departure from years of delays. This forthcoming budget is anticipated to bear the weight of a record deficit, estimated at 34 trillion Lebanese pounds. An ongoing discussion has ignited concerning the necessity for the central bank to fund this deficit, with proponents contending that such support is indispensable for meeting public sector payroll obligations, providing internet and electricity, and securing essential medicines for treating incurable diseases.

LIMS explained that contrary to the narrative put forth, a closer examination of the government’s finances reveals a different story. Firstly, the government possesses ample tax income to cover salaries and wages of all public sector employees that amount to 7.1 trillion LBP, including military and security personnel. In fact, the 2023 budget proposal expects a government income averaging 12.3 trillion LBP per month and the latest data are even more promising, foreseeing a monthly income ranging between 15 to 20 trillion LBP.

Secondly, the treasury ought not to tolerate deficits within state-owned entities such as Ogero (the national internet company) and EDL (the national electricity company). The costs associated with internet and electricity services have been adjusted and denominated in US Dollar to align with their expenses, rendering both public enterprises capable of generating revenue sufficient to meet their financial obligations.

Lastly, the issue concerning access to medicines raises significant concern. Instead of being made available to those in need at subsidized rates, these essential drugs are being smuggled out of Lebanon. This misguided subsidy system has led to shortages, inflicting undue suffering on patients grappling with incurable ailments. The primary beneficiaries of this flawed arrangement are the illicit smugglers and black-market traders who exploit the subsidies on medicines. Swift action to repeal this arrangement is of utmost urgency.

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