Lebanon’s 2019 budget deficit ‘much bigger’ than expected, says finance minister
BEIRUT (Reuters) – Lebanon’s 2019 budget deficit will be much bigger than expected after a sharp drop in state revenues, as the country struggles with its worst financial crisis since the 1975-1990 civil war, Finance Minister Ali Hassan Khalil said.
Khalil did not say how much larger he expected the deficit to be, but that revenues had contracted by about 40% over the last three months as the crisis hit consumption, imports, tax revenues and economic growth.
“Our revenues for the last three months of the year have decreased in a very big way as a result of the situation we are living with... we have numbers that are honestly very worrying,” he said.
Lebanon approved a 2019 budget last May that projected a deficit of 7.6% of gross domestic product based on a growth forecast of 1.2%. A liquidity crunch has already led banks to enforce capital controls, and the Lebanese pound has slumped by a third.
Khalil said public salaries are a priority and would be paid this month and in coming months, but that “doesn’t deny that we are faced with real difficulties in financing the state as a whole.”
Six weeks since Saad Hariri resigned as prime minister amid protests against the ruling elite, Lebanon needs to create a government that will enact urgent reforms which, it hopes, will generate support from foreign donors.
France hosted a meeting of the International Support Group for Lebanon on Wednesday, including Gulf Arab donors such as Saudi Arabia, the US and major European powers, though the meeting is not expected to bring new aid pledges.
Lebanon’s public debt burden, equivalent to about 150% of GDP, is one of the heaviest in the world. Last year’s deficit was equal to about 11.5% of GDP, and economic growth rates have been low for years.