Public entities to cut
spending by 20 percent

Wages and related

costs are excluded

The Prime Minister has instructed all state departments, public institutions, and other entities financed through the public budget to reduce their cost projections for the draft budget of 2018 by 20 percent.

The decision is part of the government’s financial policy that aims to rationalize spending and rein in public finance.

Salaries and related costs are excluded from the budget cuts. The concerned entities should resubmit their reduced draft budgets within two weeks to the Ministry of Finance and the administrative tutelage authorities.

Economist Roger Melki said that the decision will not have a significant impact on total expenditure or on the fiscal deficit because salaries, debt service, and transfers to Electricité du Liban constitute more than 80 percent of the budget and these cannot be reduced. He said that many of the remaining 20 percent cost items, such as rent, cannot be decreased either. Public works in progress are also difficult to halt.

The fiscal deficit reached $4.9 billion in 2016 and $2 billion in the first nine months of 2017. The gross public debt widened to $79.4 billion at the end of November.

Moody's said in the ‘Levant and North Africa Outlook’ report it released this month that the fiscal deficit is expected to decline slowly in the wake of renewed public investment spending in a number of sectors which include electricity and waste management.

Moody’s said in its report: “The passage of Lebanon’s 2017 budget in October and the 2018 budget consultations are credit positive because we expect them to prompt debt-stabilizing reforms.”