After 20 rounds of discussion, the Lebanese government finally approved the proposed budget law for the year 2019 and forwarded it to the parliament in its 27^th of May cabinet meeting. Following that step, the Minister of Finance Mr. Ali Hassan Khalil held a press conference, in which he provided a detailed explanation concerning the budget and its key components and figures. According to the minister, the major figures featured in the proposed budget came as follows: total expenditures were estimated at LBP 23,340 billion ($15.48 billion), while total revenues were estimated at LBP 19,106 billion ($12.61 billion). Added to the aforementioned expenditures is a long-term advance to Electricité du Liban (EDL) standing at LBP 1,306 billion ($0.86 billion), bearing in mind that EDL has already received two advances totaling LBP 1,194 billion ($0.79 billion) during the year 2019 to buy fuel, raising the aggregate amount of advances expected to be granted to EDL during the year 2019 to LBP 2,500 billion ($1.66 billion). Accordingly, the budget law of 2019 envisages a budget deficit for the year 2019 of LBP 6,734 billion ($4.53 billion), the equivalent of 7.59% of GDP, compared to a deficit to GDP ratio of 11.50% in 2018. This reduction in the deficit to GDP ratio comes in line with Lebanon’s pledge to the Cedre conference donors to slash its budget deficit by a total of 5 percentage points over a period of five years.

According to the minister’s statement, 35% of the expenditures would be allocated for debt service, 35% for public sector’s employees’ salaries, remunerations and retirement wages, 11% for Electricité du Liban, 9% for capital expenditures, with the remaining 10% allocated to cover the government’s operating expenses. The projected reduction in the budget deficit comes as a result of a series of measures aimed at boosting revenues and trimming expenditures, of which we mention:

-       Increasing the tax on interest income from 7% to 10%

-       Imposing a 2% tax on imported goods, except for pharmaceuticals, raw materials used by industrialists, hybrid and electrical cars, etc. It is worth noting that this tax also aims at protecting local industrialists and at lowering the balance of trade deficit

-       Reducing previously budgeted expenses for infrastructure projects for the year 2019 by an estimated LBP 792.56 billion ($525.74 million)

-       Imposing a 3% tax on the retirement salary for military personnel in exchange for provided health care benefits

-       Introducing a new income bracket (net annual income in excess of LBP 225 million) for personnel and enterprises, and subjecting said bracket to a 25% income tax

-       Subjecting the pension salaries of civil servants, as well as the salaries of current and former presidents, prime ministers, house speakers, ministers and members of the parliament to the income tax. In addition, the budget calls for abolishing custom waivers on imported cars for political figures

-       Raising residency fees for foreign workers. This measure also aims at reducing the demand for foreign workers and thus reducing outward remittances from the country

-       Freezing public sector spending, extending the retirement age for military personnel, capping the salary of public sector employees at 20 folds the minimum wage and limiting the bonuses and benefits received by said employees  

-       Increasing fees for special license plates, as well as imposing new fees on licenses for tinted glass and firearms

-       Imposing an LBP 1,000 fee on each hubble bubble order

-       Levying taxes on hotel rooms and airline tickets