Lebanon’s budget deficit falls to LBP 4,085 billion in 2020

Although Lebanon has been facing an economic-financial crisis since late 2019, its budget deficit has decreased, dropping from LBP 8,804 billion in 2019 to LBP 4,085 billion in 2020. According to the Ministry of Finance’s figures, the deficit in spending has reached 21.02% in 2020, decreasing from 34.5% in 2019.

Revenues

The budget revenues have registered a decline of 8.02% or LBP 1,338 billion, decreasing from LBP 16,680 billion in 2019 to LBP 15,342 in 2020, with the highest decrease recorded in the following revenues:

• The value-added tax revenues have dropped by 43%, reaching LBP 1,870 billion.
• The customs revenues have declined by 28.3%, reaching LBP 1,289 billion.
• The telecommunications revenues have increased by 6.5%, reaching LBP 1,523 billion.

Spending

State budget spending has totaled LBP 19,425 billion in 2020, down from LBP 25,476 billion in 2019, a decline of 23.7% or LBP 6,051 billion. 

The greatest decline was in debt servicing spending that has dropped by 62.8% or LBP 5,260 billion, decreasing from LBP 8,365 billion in 2019 to LBP 3,105 billion in 2020.  This is due to the government’s failure to pay debt servicing costs in foreign currencies and to the low interest paid on Lebanese pound debt. Transfers to Électricité du Liban (EDL) have also declined by 38.6%, reaching LBP 1,393 billion.

This decline in spending does not reflect the truth as the foreign currency expenditures were not based on the actual price but on the BDL official rate of 1,507.5 pounds to the dollar. Transfers to EDL have reached USD 924 million, calculated at the rate of 1,507.5 pounds per dollar. Yet, if calculated at the market’s average rate, which is LBP 8,000, they would have exceeded LBP 7,392 billion. This means that the 2020 budget has not seen a decline in deficit; the deficit would have been higher if the foreign currency expenditures were calculated at the market rate.