Fiscal deficit up to near $5 billion. Primary surplus almost zero

Fiscal deficit up
to near $5 billion
Primary surplus almost zero
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The fiscal deficit widened by close to $1 billion (25 percent) to reach $4.94 billion in 2016 compared to 2015. The increase is attributed to arrears paid to municipalities, as well as an escalating debt service.

The budget deficit widened by 24 percent to $3.67 billion, while the treasury deficit escalated by 30 percent to $1.28 billion, according to data released by the Ministry of Finance. The total primary surplus narrowed by 97 percent from $724 million to just $21 million.

On the up-side, transfers to Electricité du Liban (EDL) continued to fall, thanks to the decline in oil prices, but at a slower pace than in 2015. These transfers dropped $208 million (18 percent) in 2016 compared with a plunge of 46 percent in 2015 when oil prices fell sharply.

The increase in the fiscal deficit was mainly driven by cash paid to municipalities, an escalation in the debt service, and a rise in general expenditures. The major component of general expenditures is public salaries and related benefits which also include end-of-service indemnities and retirement allowances.

Treasury withdrawals paid to municipalities surged $411 million (66 percent) to $1 billion in 2016. In the final quarter of 2015, the Council of Ministers approved a payment of $800 million to municipalities in arrears of proceeds from their share in mobile phone revenues.

Interest payments on public debt increased $308 million (seven percent).

The growing fiscal deficit is leading to higher gross public debt, which increased 6.4 percent to almost $75 billion at the end of 2016.

Debt service and wages account for around 80 percent of total expenditure.
Reported by Shikrallah Nakhoul
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Date Posted: Mar 07, 2017