One of the facades of the inner courtyard of the Grand Serail, Beirut, Feb. 11, 2022. (Credit: Philippe Hage Boutros)
Head of the Parliamentary Finance and Budget Committee MP Ibrahim Kanaan stated Tuesday that the draft budget for 2025 needed to be revised because of the ongoing Israeli offensive in Lebanon, a country already facing a severe economic crisis since 2019. The draft budget was sent to Parliament by the Cabinet and forecast growth for 2024 and 2025.
"We have not yet been officially informed of the content of the 2025 draft budget,” although it had been "approved by the Cabinet and submitted to Parliament within the constitutional timeframe," said Kanaan in an interview with Voice of Lebanon radio station. The text was approved on Sept. 23, after caretaker Finance Minister Youssef Khalil sent it to the Cabinet on Aug. 30.
Once the draft budget is submitted to Parliament, the Finance and Budget Committee is expected to begin reviewing it on Oct. 15, at the start of the October parliamentary session. Once the final version of the draft budget amended by the committee is ready, the Parliament Speaker then convenes one or more plenary sessions to vote on it, article by article. In theory, this must be done by Dec. 31. MPs must also vote in advance on laws to close the current year's accounts, an obligation that has not been respected for decades.
In the same interview, the MP said that the 2025 budget had been prepared before the intensification of the Israeli offensive on Lebanon since Sept. 23. Therefore, revenue and expenditure need to be revised to “take into account Lebanon's postwar priorities, including travel, hospitalization and medical costs,” among others. Kanaan subsequently mentioned that he had discussed with the Parliament Speaker, the caretaker Prime Minister, the caretaker Finance Minister and the acting Governor of the Banque du Liban (BDL) to ensure that "the government makes the necessary changes to the 2025 budget" and to prevent a financial imbalance in light of the current circumstances.
The draft budget approved by the executive branch contains slightly different figures from those presented in the initial draft budget. According to the text's preamble, a financial balance is expected, with LL445,214 billion (more than $4.97 billion) in revenue and expenditure. While the initial text also stated a financial balance, it set revenue and expenditure at approximately LL427,695 billion (more than $4.77 billion). This amount was already 39 percent higher than the LL308,435 billion voted by MPs in 2024 (around $3.83 billion).
Positive growth in 2024 and 2025
"The preamble, sent to Parliament on Oct. 31 and reviewed by L'Orient-Le Jour, aims to stabilize the exchange rate of the national currency against the dollar at LL89,500 for the 2025 fiscal year, using this parity in its calculations." In addition, the Finance Ministry expects inflation to reach 4.5 percent by 2025, according to the text. This marks a clear slowdown compared to three consecutive years of triple-digit inflation between 2021 and 2023 (154.8 percent, 171.2 percent and 221.3 percent respectively) and to an inflation that was expected to remain in double digits in 2024, following the stabilization of the exchange rate.
Among other economic indicators mentioned in this preamble, the Finance Ministry forecasts a positive GDP growth of 1 percent for 2024, increasing to $26.47 billion, and a growth of 5 percent for 2025, increasing to $27.8 billion. However, these estimates contradict those formulated by certain international institutions. While the World Bank refrains from commenting on the year 2025, it predicts a 1 percent contraction in the Lebanese GDP for 2024 — an estimate made at the end of June, before the escalation of the Israeli war in Lebanon. A few weeks ago, the Institute of International Finance, which comprises hundreds of the world's leading banks, published a report forecasting a 7 percent contraction in 2024 and a contraction of at least 10 percent in 2025.
The United Nations Development Programme (UNDP) is even more pessimistic. In its first rapid assessment of the economic impact of the war on Lebanon, published Oct. 23, the U.N. agency forecast a 9.2 percent decline in the GDP for 2024, if the war persists until the end of the year. Before the war, the GDP for that same year was projected to increase by 3.6 percent.
Looking to the years ahead, the UNDP estimates that even if the war were to come to a halt by the end of the year, the Lebanese economy could suffer contractions of 2.28 percent in 2025 and 2.43 percent in 2026, unless the country receives significant international support.
Jihad Azour, Director of the Middle East and Central Asia Department at the International Monetary Fund (IMF), agrees with this projection for 2024, telling journalists in Dubai at the end of October that “conservative” estimates show a 9-10 percent contraction this year. "The impact [on Lebanon] will be severe and it will depend on how long this conflict will last,” he added. It is worth noting that the IMF has not published a growth forecast for Lebanon.
This article was translated from L'Orient-Le Jour.
