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French Version

Budget deficit takes welcome dive in first two months of year (Daily Star)

Budget deficit takes welcome dive in first two months of year - Higher tax, customs revenues contribute to 13 percent drop (Daily Star)

The budget deficit in the first two months of 2003 fell by almost 13 percent against the same period of last year, the Finance Ministry said Monday.

A ministry statement declared that the budget deficit in the first two months of this year fell to LL533.032 billion ($355 million) or 34.42 percent, from LL611.199 billion or 43.03 percent.

The ministry said that higher revenues from taxes and customs duties contributed to the fall in the deficit. Total revenues jumped by 25.96 percent to LL1.09 trillion, while spending rose by 9.41 percent to LL1.554 trillion in the first two months of the year.

The budget deficit in the month of February alone also fell to 33.20 percent from 47.20 percent in the same month of last year. Revenues from the value-added tax in the first two months of this year also rose to LL257 billion from LL218 billion in the same period of last year. Debt servicing, which consumes the bulk of the government’s revenues, fell by 3.13 percent to LL723.8 billion.

The ministry said the primary surplus, excluding the cost of debt servicing, rose to LL189 billion from LL136 billion, compared to the same period of last year.

The government of Prime Minister Rafik Hariri is under tremendous pressure from the World Bank and its key Arab and Western allies to tackle the $31 billion public debt, representing more than 179 percent of the country’s gross domestic product.

Hariri utilized all his contacts in the Arab world and Europe to win $4.4 billion in soft loan pledges during the “Paris II” conference in November of last year.

The government has received so far more than $2.2 billion in the form of low-interest 15-year Treasury bills from France, Saudi Arabia, Kuwait, the United Arab Emirates and Oman.

The soft loans are aimed at reducing debt servicing by $300 million a year at least. In return, Hariri pledged to lower the budget deficit to 25 percent at the end of 2003.

To achieve this task, the government and the Central Bank pressed commercial banks to use 10 percent of their $43 billion in total deposits to buy two year T-bills with zero percent interest. This will help the government reduce debt servicing by another $400 million a year.

In addition, the Central Bank is expected to use its huge portfolio of T-bills to reduce debt servicing. But most economists warn that these measures will not be sufficient if they aren’t coupled with privatization of state-owned assets. Some of these economists fear that the regional situation and constant political bickering would slow privatization efforts this year.

Beirut 24-03-2003
Osama Habib
The Daily Star

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