Fiscal deficit
drops 24 percent

Tax revenues rise 17 percent

The fiscal deficit narrowed 24 percent to $3.76 billion in 2017 as total revenues increased at a greater rate than expenditures, according to the Ministry of Finance (MoF).

Total revenues, mainly driven by tax revenues, jumped 16 percent to $10.8 billion while total spending rose nine percent to $14.1 billion.

Tax revenues surged by $1.2 billion or 17 percent. Non-tax revenues increased by $315 million or 14 percent.

The decrease in the fiscal deficit was the result of an improvement in tax collection and additional austerity measures regarding spending, said Marwan Barakat, Chief Economist and Head of Research at the Bank Audi group. He said that there is a need to improve tax collection further as fiscal evasion still accounts for eight percent of GDP. Barakat said that the projected fiscal-deficit-to-GDP ratio in the 2017 budget was 9.3 percent while the actual ratio was 7.1 percent. The projected ratio for the 2018 budget is 8.5 percent.

Income tax on profits soared 84 percent to $1.4 billion. The tax on profit included a tax of $775 million imposed on the banks’ one-off revenues generated from the swap operations that were carried out with the Central Bank in 2016.

Revenues from Valued Added Tax (VAT) increased by 7.5 percent to $2.31 billion in 2017 compared with the previous year.

Telecom revenues, up by 1.5 percent, accounted for half of the non-tax revenues, down from 56 percent in 2016.

Treasury transfers to finance the chronic deficit of Electricité du Liban (EDL) increased by 43 percent to $1.33 billion due to higher oil prices.

Interest payments on public debt increased 4.7 percent to $5 billion. Interest payments on domestic debt represented 65 percent of the total interest paid in 2017. The remaining 35 percent was paid on foreign debt.