Rising revenue and falling spending cut Lebanon’s budget deficit by 30.7% y/y to LBP3.68tn ($2.4bn) in the first ten months of 2014, data from the finance ministry showed. The narrowing budget gap will help the government cut the worrying debt-to-GDP ratio that is forecast to reach144% of GDP in 2014, according to S&P.

Lebanon’s gross pubic debt grew 5.3% y/y to $66.6bn at end-November 2014.

Rising LBP-denominated domestic debt, as local banks remain the main subscribers to the Treasury issuances, continues to boost Lebanon’s gross public debt.

Earlier this week, the government mandated Lebanon’s Societe Generale Bank, Blom Bank and Citi to arrange a $1bn 7-to-10-year bond issue to help finance the budget needs, daily Assafir reported on Thursday February 5.

The government also recently adopted a minimum salary hike for the public sector after almost two years of debate and political bickering. The government also adopted some partial tax hikes including raising the VAT to 11% from the current 10% to boost budget revenue.

The deficit equalled to 21.6% of total spending at end-October, down from 30.8% a year earlier. Improving fiscal balance, and excluding debt servicing, also helped the state budget achieve a LBP1.696tn primary surplus at end-October, reversing a LBP473bn primary deficit a year earlier.

Total budget revenue grew 11.5% y/y to LBP13.3tn at end-October whereas total spending fell 1.5% y/y to LBP16.99tn.

Tax proceeds rose 3.6% y/y to LBP9.2tn at end-October, accounting for 69.2% of total revenue. Lower imports during the period cut customs proceeds by 5% y/y to LBP1.71tn while VAT receipts grew 1.3% y/y at LBP2.97tn.

Non-tax proceeds climbed 11.8% y/y to LBP2.7tn lifted by rising telecoms revenue, up 5.5% y/y to LBP1.61tn.

Lower fuel costs also cut spending on the loss-making Electricite du Liban by 9.3% y/y to LBP2.46tn at end-October.