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Beirut cuts deficit spending by 6 percent for first 11 months of year: Higher revenues compensate for more debt servicing, EDL losses
Posted on: 1/10/2008 12:02:00 PM

Despite Lebanon's political crisis, the Finance Ministry says it managed to reduce the deficit to spending ratio in the first 11 months of 2007 to 31 percent from 37 percent in the same period of 2006. According to a statement issued by the ministry Tuesday, the results were reasonably good despite the delicate condition in the country.
It added that the primary surplus, excluding the cost of debt servicing, jumped by 372 percent to LL964 billion ($643 million) in the first 11 months of this year. The primary surplus was LL206 billion in the first 11 months of 2006.
The statement said good results were achieved despite the noticeable increase in the debt service and electricity costs during the reporting period.
Total allocations to the troubled Electricite du Liban (EDL) up to November of this year reached a staggering LL1.396 trillion, an increase of LL238 billion compared to the same period of 2006.
EDL is draining the resources available to the Cabinet, which has been planning to privatize the sector in an attempt to end mounting losses.
Successive governments since 1993 spent nearly $10 billion on EDL to cover the deficit.
Nearly 70 percent of the electricity spending goes to cover the high cost of fuel oil on which most of the country's aging power plants still run.
In addition, the statement said the cost of debt servicing in the first 11 months of this year rose by LL490 billion to reach LL4.569 trillion.
Debt servicing represents more than 48 percent of the total government budget, followed by the salaries of public staff.
The government taps the local and international market to finance the public debt which now reached $41 billion, or 185 percent of the county's GDP.
Total state revenues in the first 11 months of 2007 reached LL8.032 trillion, an increase of LL1.309 trillion compared to the same period of 2006.
VAT revenues rose by LL613 billion while non-tariff taxes rose by LL506 billion.
Apart from the tax revenues, the government received LL152 billion in the form of grants.
Total government spending in the first 11 months of 2007 reached LL11.637 trillion, an increase of 10 percent.
Finance Minister Jihad Azour said earlier that the government of Prime Minister Fouad Siniora would have made better results in 2007 if the political situation had been more stable.
The government is capitalizing on the privatization of the country's two mobile networks to reduce the public debt by almost $7 billion in 2008.
This upbeat scenario, however, depends on the early election of a Lebanese president and the creation of a national unity government.
International rating agencies and investment banks fear that the government may not be able to meet the objectives of Paris III reform plans in 2008 if the current deadlock persisted.
They also warned that many donor states may be reluctant to pay Lebanon the rest of the pledged soft loans and grants if economic reforms slowed down.
Furthermore, the Lebanese banks will probably charge higher interest rates on the new loans to the government in 2008. (The Daily Star)


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