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Many MPs have voiced their concerns, alternatively denouncing “hidden deficits” or “covered-up deficits” in the proposed 2023 budgets (which have not been voted on yet) and that of 2024.
The 2024 budget project, examined by parliamentary committees, anticipates a deficit of around LBP 17 trillion. This figure has been contested by numerous MPs who estimate that the deficit is over LBP 40 trillion when factoring in Treasury advances.
As a result, the budgets submitted by the government to Parliament are mere formalities. They do not accurately represent the actual deficits incurred, as Treasury advances are not taken note of. Instead, they have become a means of hiding the actual deficits, while in practice, these deficits continue to deepen. The case of Treasury advances to Electricité du Liban (EDL) of nearly $35 billion effectively demonstrates the “covered-up” or “undeclared” deficits of successive budgets.
Treasury Advances
The government has gotten into the habit of generously providing off-budget Treasury advances to various ministries and state institutions, fully aware that they are unable to repay them. This practice starkly violates the current General Accounting Law, which dictates that Treasury advances should only be granted to organisms that can reimburse them. As a result, these Treasury advances have morphed into financially unviable and unrecoverable credits, exacerbating the deficits in successive state budgets.
By definition, Treasury advances as such are temporary. They are allocated to a state entity to address immediate cash requirements, with the expectation that the essential funds for repayment will be derived from future revenues.
Exorbitant Amounts
On Monday, January 8, the caretaker Minister of Finance, Youssef Khalil, submitted, at the request of the Finance and Budget Committee President, Ibrahim Kanaan, a list detailing Treasury advances granted from 2020 to 2023, along with another list of donations made to the state from 2018 to 2023.
According to Kanaan, the advances amounted to LBP 31,892,584,935,913 in 2023 alone, constituting 72% of the expenditures legally authorized under the provisional twelfth rule.
Excessive Taxes
Moreover, the government’s budget proposal, submitted within constitutional deadlines to Parliament, anticipates significant increases in taxes and levies without accounting for the taxpayer’s fiscal capacity. The government, through its 2024 budget plan, aims to raise state revenues from 6% of the GDP in 2022 to 17% of the GDP in 2024, to reduce the public debt-to-GDP ratio to 100% by 2026 and 80% by 2032.
However, by definition, the budget proposal is formulated based on three criteria: economic growth, inflation rate and GDP. It appears that these three elements were not adequately considered in the 2024 budget proposal.
This suggests that the escalation in tax burdens serves no purpose other than to offset the salary increases for government employees, given the devaluation of the Lebanese pound. It’s worth noting that the number of public sector workers witnessed an unjustified increase of 25,000 from 2017 to 2019, reaching a total of nearly 320,000 employees in 2019.