iStock/OSTILLby Kudakwashe Muzoriwa
The Lebanese caretaker finance minister said that he expects state revenues to drop by nearly half this month amid a deepening financial and political crisis, as he proposed a sharp rise in the ceiling on insured bank deposits to help restore calm.
Ali Hasan Khalil, Lebanon’s caretaker Finance Minister, said that there had been a ‘massive’ drop in income that put this year’s deficit target beyond reach, with a fall of between 40 per cent and 45 per cent expected in December 2019 from a year ago.
The Lebanese government usually gets LBP 5 trillion Lebanese ($3.3 billion) in the last three months of the year, said Khalil.
Lebanon relies on remittances from the millions of its citizens living abroad. However, capital inflows needed to finance the large current-account and fiscal deficits have slowed as confidence has dwindled while outflows have gathered pace.
The finance minister said that banks, under growing pressure as the crisis shows few signs of ending, have not been subscribing to Treasury bills to finance the deficit.
Bloomberg reported that with deposits also under pressure, banks have responded by tightening restrictions on the movement of capital and even refusing to dispense dollars.
Khalil said he had submitted a draft law that amends the limit covered by the National Institute for Bank Deposit Insurance to LBP 75 million from LBP 5 million, established under Lebanon’s monetary law.
The amendment requires approval by parliament. The insurance fund’s capital is made up of contributions from local banks.
Lebanon approved a 2019 budget last May 2019 that projected a deficit of 7.6 per cent of the gross domestic product based on a growth forecast of 1.2 per cent.
The International Monetary Fund said that Lebanon’s public debt burden, equivalent to about 150 per cent of GDP, is one of the heaviest in the world. Reuters reported that Lebanon’s 2018 budget deficit was equal to around 11.5 per cent of GDP and economic growth rates have been weak for years.