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The objective of the 2025 budget proposal is to maintain a relative balance between revenues and expenditures, with the aim of keeping the overall deficit under 4.1%, or approximately $190 million.
The draft budget submitted in August by caretaker Finance Minister, Youssef Khalil, forecasts a substantial increase in revenues compared to the 2024 budget, exceeding 101 trillion Lebanese pounds ($1.1 billion). These revenues, primarily from taxes, are projected to total LBP 410 trillion ($4.6 billion).
Estimated Figures vs. Actual Results
It is entirely justified to question the figures and statistics used by the Ministry of Finance in developing the 2025 budget, especially in view of recent criticism from Standard & Poor’s regarding the transparency and consistency of data publication.
In fact, we lack information on the actual performance of public finances—neither the real figures nor the estimates—making it impossible to compare the 2025 budget indicators with those of the 2024 financial law. It is worth noting that while the 2024 budget projected a deficit of 14% of expenditures, the 2025 budget aims for a deficit of 4.1%.
The Same Directions
The key directions of the 2025 budget proposal align closely with those of the 2023 and 2024 budgets in terms of revenue and expenditure distribution. In fact, 90% of expenditures are allocated to current spending, with only 10% earmarked for investment.
On the revenue side, 80% comes from taxation and 20% from non-tax sources.
Moreover, as with the 2024 financial law, the 2025 budget proposal does not present a clear economic vision.
Khalil has, in his meetings with economic representatives, primarily emphasized his plans to expand the tax base and improve tax compliance. He also pointed out his intention to improve coordination between the public finance department and the customs administration.
Reduced Deficit
The envisioned reduction of the deficit to 4.1% of expenditures is not the result of any exceptional measures taken by the 2025 budget’s authors. This is attributed to the Treasury being relieved of the burden of interest payments on domestic and external debt. These interest payments, which peaked at $5.4 billion in 2019, are projected to be capped at $350 million in 2025.
That being said, the budget proposal projects a 39% increase in expenditures compared to the 2024 budget, reaching $4.78 billion (about 428 trillion pounds). However, this figure represents only approximately 30% of the State’s expenditures in 2019, which totaled around $15.7 billion.
As for the projected revenues in the 2025 budget, they remain substantially below pre-crisis levels, amounting to only 43% of the actual revenues recorded in the 2019 budget.
Treasury Bonds
What is shocking about the 2025 budget proposal is that it anticipates a deficit of approximately $196 million and seeks authorization to finance this gap through the issuance of Treasury bonds. The main uncertainty is who will purchase these bonds. Since the default on Eurobonds, local banks have clearly lost interest, and the Central Bank has stopped financing the State’s deficit since 2023.
Khalil submitted the 2025 budget proposal to the government on schedule. However, as indicated by its preliminary status, the proposal may undergo significant revisions before it is adopted and enacted into a financial law. The development process is still in its early stages.
