Lebanon Draft Budget Sent to Cabinet, Envisages Increase in Spending
Lebanon’s Finance Minister Raya Haffar el-Hassan sent a draft 2011 budget to the Cabinet yesterday, calling for a 12.7 percent increase in expenditure.
Fiscal spending will rise to 20.6 trillion Lebanese pounds ($13.7 billion), while revenue is projected to increase 16 percent to 15.1 trillion pounds, according to the proposals. The subsequent deficit is equivalent to 8.6 percent of expected gross domestic product, down from a revised 8.9 percent this year. The initial shortfall forecast for this year was 10.7 percent.
Once approved by the Cabinet, the proposals will be sent to parliament for discussion. The Cabinet on June 19 approved the draft budget for 2010, which has yet to be ratified by parliament. If approved, it would become the first ratified budget since 2005 because of political disagreements, a month- long war with Israel and internal civil strife.
Lebanon’s economic growth will accelerate to 5 percent next year from an initial forecast of 4.5 percent in 2010, according to the draft budget. In May the ministry had forecast 4 percent growth for next year.
The budget forecasts that inflation will slow to 2.8 percent in 2011 from the International Monetary Fund’s 5 percent estimate for this year. The IMF estimates inflation will be 3.4 percent in 2011.
Prime Minister Saad Hariri’s government, which was formed in November, has to finance a public debt that is estimated to reach $55.3 billion next year or about 129 percent of GDP from about 131 percent in 2010. Lebanon’s debt to GDP ratio has declined from a high of 180 percent at the end of 2006. It accumulated the debt as it rebuilt the country after a 15-year civil war that ended in 1990 and the conflict with Israel in 2006.
Moody’s Investors Service rates Lebanon’s local and foreign currency bond ratings at B1, four levels below investment grade. Standard & Poor’s rates Lebanon at B, five levels below investment grade.
To contact the reporter on this story: Massoud A. Derhally in Beirut, Lebanon at mderhally@bloomberg.net
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