Fiscal deficit widens in H1

Primary surplus down due to
spending on energy, wages

The fiscal balance recorded a deficit of $1.15 billion in the first half of 2012, compared to a lower deficit of $880 million during the same period in 2011. The primary surplus over this period dropped by 32 percent to $787 million at end-June.

Gross public debt totalled $56.38 billion at end-June, posting a three percent increase from its end-2011 level. Interest payments for the first half of the year equalled $1.85 billion, almost five percent less than the amount paid in the first half of 2011.

Government expenditures grew by ten percent to $6.3 billion, mainly due to a 43 percent rise in transfers to the power production company, Electricité Du Liban (EDL). Personnel costs also increased by eight percent to $2 billion, mainly due to an 18 percent rise in retirement and end-of-service compensations to $600 million.

Social expenditures increased by ten percent year-on-year, to $1.5 billion. The social spending covers basic services of health, education, retirement, and end-of-service indemnities, transfers to the National Social Security Fund (NSSF), and other areas of intervention where the Government provides social allowances. End-of-service indemnities and retirement wages accounted for the highest share of social spending at almost 40 percent.

The growth in spending was partially offset by a six percent increase in total revenues which reached $5.17 billion. This rise was mostly due to a nine percent increase in tax revenues. Income tax on capital gains and dividends posted the highest rise among tax revenues, as it grew by 53 percent to around $150 million. This significant growth is explained by the field inspections undertaken by the Ministry of Finance.

Taxes on wages and salaries grew by 17 percent to $182 million, mainly due to the wage raise granted to the private sector since January 2012. Taxes on property rose by 13 percent to $410 million, due to an eight percent rise in the total values of transacted properties.

Transfers from the tobacco company Régie reached $40 million, against zero in the first half of 2011. The growth in the Régie’s profits is due to the Ministry of Finance’s decision, in October 2011, to increase the price of cigarettes by LL250 per pack.

Non-tax revenues totalled $881 million at end-June, down by three percent from the corresponding period in 2011. But these figures were based on projected transfers from Telecoms. On paper, expected Telecoms transfers in the first half of 2012 were $720 million, while in fact only $408 million were transferred in cash.