Lebanon sees 28 percent rise in government revenues

[NExtLeb]

Originally Posted by Kurt

Thank God that he didn't do such link! Otherwise we would had been in a worse shape financially than we are today. A very far-sighted move from Salameh indeed.

Salameh was indeed far-sighted and banned the dealing in such instruments. Great. But I believe all what Salameh did the past few months is to promote his profile in international media as the "savior" of Lebanon. I think, we Lebanese, should not pay the guy more than what he deserves. Afterall, he was/is part of the same mafia that ruled the country in post 1992-period, and responsible partly for the government's financial and monetary policy. Few questions on interest rates paid for internal debts/loans issued by Lebanese banks (mafia) for the government or let him tell us something about Bank AlMadina, then i can reconsider my opinion about him.

[NExtLeb]

Originally Posted by Danny Z

This still counts as growth since the formula is GDP = C + I + G + (X − M)

C (Consumption), I (Investment), G (Government spending) and X − M (Net Exports)

The only way to know if this growth is sustainable is to see if the I is for the replacement of what July war did or if it is for new Investments, if it is a replacement then it is not sustainable, if these are new investments then we should analyze a little more what are those investments and how they can in the future influence the GDP by mainly increasing X and C.

GDP is by no means a measurement for sustainability. I mean it doesnt matter if GDP is 5%- 6% or even more, while all other indicators suck. If I is increasing sustainably, it is true as you are suggesting, but does this growth create jobs. The problem with all this fanfare that all Hariri mafia keeps on telling us that we are "witnessing increase in capital flow, and deposits"; great, but so what? is that creating jobs for the 10,000+ (i couldnt get an exact figure) that are graduating this month from all universities in Lebanon? The reality is that most new investments in Lebanon go for real estate (and sex tourism). You can see the prices of real estate for the past few years (constant increase until today), while the prices collapsed all over the world with the crisis unfolding, except in Lebanon. They are happy with an economy based on real estate investments, tourism, Gulf money, and expats remittances while no interest whatsoever in productive capacities of the country. We do graduate tons of engineers, doctors, other professionals, and sciences people, they tell them either leave the country or do hotel management (i'm not by no means underestimating the profession). That's all what they care about. For example, the ICT sector grew at 15% rate the past 4 years in the middle of the turmoil, wbala jmilit dawle. What I am saying is that just some basic policy perspective on Lebanese potentials and creativity, and we will be ok.

NB: The Economist articles are becoming less accurate and in-depth as they are usually. This one you put here, along with the Hezbollah/Egypt article 2 months ago, are an example of very superficial analysis stating the basics. While their coverage/analysis of last 3 years turmoil was way more professional and accurate.

[Dry Ice]

Lebanon sees decline in deficit relative to revenues

By Regional Press Network (RPN)
Saturday, July 04, 2009

Tamim Akiki


BEIRUT: Lebanon's fiscal performance report through the end of May showed a decline in the deficit as a percentage of revenue to 29.14 percent compared to 33.56 percent during the same period in 2008. The decrease in the deficit comes on the back of a solid 173 percent year-on-year increase in fuel-tax revenue in May, and a 38.8 percent year-on-year decline in spending on the country's electricity company, Electricite du Liban (EDL).

However, the gross deficit in 2009 through the end of May reached LL2.122 trillion ($1.41 billion), up 3.5 percent from the same period in 2008. Although this marks an improvement from April when the deficit rose 22.7 percent to LL1.824 trillion, the swelling of the country's debt especially in a period of spiking continues to pose significant risks to sustainable economic growth.

Commenting on the report to RPN on Wednesday, Alexander Mouradian, deputy head of economic analysis at Blominvest Bank, said: "EDL and interest expenses aside, Lebanon is in a great shape." "We have strong VAT numbers and solid revenues from telecommunication that continue to support revenues, but we also have EDL and interest payments draining the budget," Mouradian added.

Lebanon's strong revenue growth of 70.2 percent in April appeared to slow to a still healthy 24.2 percent in May as fluctuations in oil prices in 2008 continue to drive the growth of year-over-year revenues from the fuel tax. Total government revenues reached LL983.7 billion in May, posting an increase of 27.2 percent in the first five months of 2009 to LL5.16 trillion.

Furthermore, a decline in the rate of growth of revenues from income taxes and telecommunication services curtailed total revenue growth. Income tax revenues grew 4.3 percent to $118.2 million in May, down from 44 percent in April, but still sustaining a healthy 21 percent growth to $472.3 million in the first five months of the year.

Revenues from telecommunication services saw a decline in growth to 9.2 percent compared to a 306 percent increase seen in April. The increase in April was not expected to be sustainable as it resulted from a one-time cut in cell-phone fees that led to a spike in usage time and the number of subscribers.

Revenues from profit taxes also posted a slowdown in growth to 10.3 percent in May from 190.3 percent in April, bringing total growth for the first five months to 30.9 percent to reach $94.2 million.

Revenues from capital gains dropped 19.2 percent to $26.6 million in May, and are now down 2.3 percent in the first five month to $47.5 million.

Despite the spotty slowdown in growth of some financial statement items, some items showed strong gains.

The value-added tax, up 33.9 percent year-on-year to $126 million, reflected a massive increase in spending in May as tourists flocked into the country ahead of the June 7 polls.

The number brings growth in the first five months of the year to 18.4 percent or $801.7 million and can be expected to post strong gains in the month of June as the number of tourists peaked at the onset of the parliamentary elections.

Two other items to post steady gains are the taxes on wages and salaries in addition to the recently introduced 5 percent tax on interest, which rose 53.5 percent and 18.1 percent respectively in May. Increases in wage and salary revenues usually reflect improving labor market conditions, while increases in the interest tax revenues indicate an improvement in credit lending, in the absence of an increase in interest rates.

On the spending side, lower global oil prices in May 2009 compared to 2008 drove down the government's contribution to its biggest revenue drain known among locals as EDL. Spending on EDL dropped 38.8 percent to $98.1 million bringing total spending for the first five months of the year to $898.1 million, still up 35.5 percent year-on-year as a result of higher spending in the first three months of 2009.

According to Mouradian, EDL should be the first step in a reform plan, adding that the electricity company "can be restructured if it cannot be privatized, but the current mammoth spending on the company needs to be reigned in."

He also said "EDL not only represents expenses for Leba?non, but also lost revenues from a potentially profitable company similar to telecom companies."

Until a reformed EDL is born, tough decision will continue to be made, including the move in May to cut distributions to municipalities by 67 percent to $16.7 million compared to May 2008, thus bringing the total amount for the first five months down 31 percent year-on-year to $89.1 million.

Luckily, interest payments sided with the government in May, falling 10 percent to reach $262.8 million. However, at $1.61 billion, the number for first five months still represents a 14.8 percent rise compared to the same period in 2008.

Nevertheless, Mouradian believes that "the debt needs to be tackled through some kind of a long-term, possibly 10-year, plan that would limit the government's need to issue debt to finance its spending."

But not all the fiscal report was negative.

The full half of the May cup showed a 38 percent year-on-year increase in the first five months in the primary surplus which excludes interest payments. The number marks an improvement from the 32 percent decline in the first four months, driven mostly by the disproportional revenue growth in May compared to fairly stable expenditures.

"A primary surplus is definitely a great plus. It means we are now a sustainable country that doesn't need to borrow to finance its spending. If we can create a plan to eliminate our debt, Lebanon's economy can benefit even more from the freed-up capital in revenue-generating investments," concluded Mouradian.

[Kurt]

Here is my advice, everyone: If you have extra cash go and buy real estate. Do not hesitate one bit or wait for better prices. The days ahead of us are promising. Emaar company along with other real estate giants are doing a sincere focus study on current Lebanon real estate market especially after the gulf got tanked because of the stagnation of the global economy. Too much cash in the banks and with this semi poltical stability enviroment, we might see a boom unobserved before in Lebanon. Lebanon in my opinion has a promising future.

[NExtLeb]

Originally Posted by Kurt

Here is my advice, everyone: If you have extra cash go and buy real estate. Do not hesitate one bit or wait for better prices. The days ahead of us are promising. Emaar company along with other real estate giants are doing a sincere focus study on current Lebanon real estate market especially after the gulf got tanked because of the stagnation of the global economy. Too much cash in the banks and with this semi poltical stability enviroment, we might see a boom unobserved before in Lebanon. Lebanon in my opinion has a promising future.

Kurt, what a boom you are talking about?? a real-estate boom? no, thank you.
1- Who has cash anyways? I mean middle-middle class and below (majority of Lebanese) cannot afford anything like the current prices.
2- Cash in banks? so what? this is not local cash, and even if it proved resilient in face of all turmoil, the cost of sitting on banks balance sheets is high, with no much people affording loans, unless with substantially subsidized interest rates.
3- Real estate boom. Again who is benefiting from it? A tiny real estate tycoons (locals and khalijis) with no value in the real economy. again as i posted before, does this CREATE JOBS. ? thousands of fresh graduates this month, engineering, medicine, sciences, social sciences... where are the jobs for those? Is Lebanon only competitive advantage real estate? This all Hariri model for the economy failed, and I fear now all what is being prepared beyond government formation and all the bs coming with it, is to reinstate same economic policies that led us to the current crisis.

[Dry Ice]

VAT Lebanon’s largest source of tax receipts – ministry

Daily Star staff
Tuesday, August 11, 2009


BEIRUT: Figures issued by Lebanon’s Finance Ministry show that fiscal revenues, excluding grants, were equivalent to 23.9 percent of GDP in 2008, up from 23.2 percent of GDP in 2007, as reported by Lebanon This Week, the economic publication of the Byblos Bank Group. Tax revenues were equivalent to 16.3 percent of GDP, up from 14.8 percent of GDP in the previous year, while non-tax budgetary revenues amounted to 5.9 percent of GDP compared to 6.7 percent of GDP in 2007.

The distribution of tax revenues in 2008 indicates that domestic taxes on goods and services totaled $1.9 billion, constituting 40.3 percent of total tax receipts. They were followed by taxes on international trade with $1.1 billion, or 22.1 percent of the total; taxes on income, profits and capital with $1.04 billion, or 21.8 percent of the total; taxes on property with $0.5 billion, or 10.9 percent of the total, while the balance of nearly 5 percent originated from fiscal stamp fees. Tax revenues rose by 28.7 percent in 2008, largely driven by an estimated 17 percent nominal growth of GDP in 2008. Taxes on property posted a 47.6 percent increase year-on-year, followed by domestic taxes on goods and services with a 30.1 percent jump, fiscal stamp fees with a 29 percent improvement, taxes on international trade with a 27.3 percent growth, and taxes on income, profits and capital with a 19.6 percent rise. The ministry attributed the improved tax performance in 2008 to better economic activity, a boom in the real estate market, the good state of the financial sector, the growth in imports and the expansion of domestic consumption.

Value-added tax was equivalent to 5.9 percent of GDP in 2008, up from 5.3 percent of GDP in 2007, and accounted for 89.3 percent of domestic taxes on goods and services, with the balance divided between car registration fees (6.8 percent) and passenger departure tax (3.7 percent). Further, the breakdown of taxes on income, profits and capital shows that corporate income tax totaled $616 million and represented 39.4 percent of the total, followed by tax on interest income with $485 million (31 percent), taxes on wages and salaries with $273 million (17.5 percent), and taxes on capital gains and dividends with $170 million (10.9 percent). In parallel, real estate registration fees totaled $580 million and represented 73.8 percent of property taxes, with built property tax at $130 million or 16.5 percent of the total. Also, the excise tax totaled $902 million and accounted for 56.8 percent of taxes on international trade, while customs revenues reached $686 million for a 43.2 percent share.

The distribution of corporate income tax shows that financial institutions accounted for 28.4 percent of the total, down from 29.5 percent, and constituting by far the largest single taxpayer by source. They were followed by real estate activities with a 12.1 percent share, wholesale trade of household appliances with 3.1 percent, sales of vehicles with 2.9 percent, telecommunications with 2.8 percent, manufacturing of cement products and wholesale trade of food products and tobacco with 2.7 percent each, wholesale trade of fuel products and derivatives with 2.6 percent, business consultancy with 2.4 percent, manufacturing of fertilizers with 2 percent, while all other categories represented the remaining 38.3 percent.

The distribution of non-tax budgetary receipts shows that income from public institutions and government properties accounted for 77.6 percent of the total, followed by administrative fees and charges with 18.5 percent, and other non-tax income with 3.6 percent.

[Dry Ice]

Lebanese GDP may reach 7 percent during 2009

Daily Star staff
Friday, September 11, 2009


BEIRUT: Central bank Governor Riad Salameh renewed confidence in the performance of the Lebanese banking sector Thursday, citing the International Monetary Fund’s expectations of a GDP growth rate reaching 7 percent during 2009, if the recent revival in lending activity is preserved. According to the latest weekly monitor study issued by Bank Audi, total loans of commercial banks progressed by LL1,381.3 billion during the month of July alone, surpassing the growth in loans during every month since February 2008, bearing in mind that, in 2008 and prior to the outbreak of the crisis, Lebanese banks were following an aggressive lending strategy.

“The balance of payments surpassed $3 billion for the first seven months of the 2009 and the monetary situation is very positive,” said Salameh.

The same report issued by Bank Audi reported that the sturdy influx of capital into the country over the first seven months of 2009 resulted in a cumulative balance of payments surplus of $3,347.4 million, a record high for Lebanon, and up from a surplus of $1,611.2 million in the first seven months of 2008.

It said the cumulative surplus in the first seven months of 2009 is the result of a rise of $5,033.1 million in net foreign assets of the central bank, which more than offset the decline of $1,685.7 in those of banks and financial institutions.

Salameh said the dollarization rate reached 67 percent, which reflects great trust in the monetary situation in the country and the Lebanese pound.

His remarks came during the monthly meeting of the Lebanese banks association.

He lately disclosed that up to $16 billion of cash came into Lebanon over the past 12 months, 90 percent of which was converted into Lebanese pounds.

He reiterated that the central bank will continue to uphold the same monetary policy because preserving the Lebanese pound has become the cornerstone of stability.

Salameh also praised the Lebanese banks’ favorable reaction to the regulations issued by the central bank concerning housing loans and the other new projects including environmental and educational ones in return of the cancellation of mandatory reserves.