$3 billion to be cut from yearly imports

IMF reports major local gains from drop in energy prices

The IMF said that the country is expected to be among the biggest beneficiaries from lower oil prices this year. In its latest `Regional Economic Outlook` (REO), domestic gains from lower oil prices are estimated at about 4.3 percent of the Gross Domestic Product (GDP).

The gains come from the difference between the values of projected net oil exports in 2015, compared to oil prices realized in October 2014.

Marwan Barakat, Head of Research at Bank Audi, said: “The savings come from a decline in the value of imports.” It amounts to $3 billion a year.

The fiscal balance is expected to improve by 1.75 percent of the GDP, compared to projections in the October 2014 REO. Barakat said that this is a result of lower transfers to Electricité Du Liban (EDL).

Value Added Tax (VAT) revenues have declined from $2.5 per tank (20 liters) in June 2014 to $1.5 currently. But Barakat said that the VAT impact is limited in comparison to the improvements in the fiscal deficit.

Lower oil prices will create favorable conditions for continuing subsidy reforms accompanied by better targeted social safety nets and for introducing tax reforms. The IMF advised the Government to reinstate the $3.3 tax per tank that was rescinded when oil prices were high.

Barakat said that improvements were witnessed in the deficit ratio (to GDP) last year, compared to 2013. Deficit ratio (to GDP) reached eight percent last year decreasing from 9.3 percent in 2013. This was due to the efforts taken by the Cabinet to cut expenses as well as improving tax collections. There will be an additional decrease in the deficit ratio this year, exceeding two percent, due to the savings that will come from EDL transfers, as well as the increase in revenues due to a rise in taxes per gasoline tank.