BEIRUT — In its budget proposal the Finance Ministry is estimating 3 percent real GDP growth for 2022, an exchange rate of LL20,000 to the US dollar and a deficit to GDP of 2.33 percent, the ministry clarified Wednesday in an addendum to the draft budget.
Here’s what we know:
• Discussions around the budget kicked off Tuesday at the Grand Serail. This was the third meeting of the government after a more than three-month hiatus. The first meeting on Monday was held at Baabda’s Presidential Palace but ended without discussing the budget for 2022.
• Concurrent with the cabinet meetings, the Lebanese team in charge of negotiating with the International Monetary Fund is holding daily meetings with the fund by video conference to work on a preliminary deal.
• On Wednesday, the Finance Ministry issued an addendum to the budget proposal explaining its rationale behind the numbers being forecasted. The report lists the budget’s major objectives as economic stability, reforms and financial recovery.
• The report also qualifies the budget as being an emergency budget, inclusive, sustainable and in adherence with proper governance. It states that the budget’s aim is also to manage the deficit, since no external source of financing is currently possible, with the final aim of reducing debt.
• It lists as main risks potential political instability and absence of decision-making that could delay the recovery process.
• The report also mentions the unified exchange rate as a major hurdle to monetary stability, especially because of its potential impact on receipts’ collection. A drop in the lira value would mean an increase in expenditures, and subsequently a wider deficit.
• It also addresses the issue of volatility in commodity prices, and how an increase in oil prices can impact the budget of Electricité du Liban.
• The assumptions behind the revenue section are based on real GDP growth of 3 percent for 2022 and the revenue estimates are based on actual collections in 2021.
• However, the revenue estimates will be then marked up on the back of a suggested increase in the US dollar to lira exchange rate for customs taxes, as well as a revaluation of the stamp duty, real estate and administrative fees based on current exchange rate levels.
• The report does not not offer any indication as to the exchange rate adopted in the other revenue forecasts. For example, it gives no suggestion of what exchange rate will be used for telecommunications and other similar services priced in US dollar and still pegged at LL1,507.5.