Lebanon's budget gap narrowed 90% y/y to just LBP 26.8bn (USD 17.7mn) in January due to an expected sharp drop in spending and a mild revenue growth, the finance ministry said. Lower transfers to the loss-making Electricite du Liban (EDL) due to favourable weather conditions and higher income and corporate tax collections in the beginning of the year also helped cut the budget gap. The January reading, thus, is not a trend-setter and the budget gap will likely widen sharply in H1.

Total revenue rose 2.4% y/y to LBP 1.542tn and spending fell 11.4% to LBP 1.569tn. The primary budget surplus jumped 508% y/y to LBP 302.1bn in January. The tax income grew 5% to LBP 1.19tn, lifted mainly by higher customs proceeds which climbed 9.4% to LBP 197.3bn in January as domestic demand remains strong. But sluggish tourism activity cut VAT receipts by 1.5% to LBP 458.1bn. A weak real estate activity also reduced non-tax income by 19% y/y to LBP 241.7bn over the month. Telecom proceeds also dropped 9% to LBP 157.8bn. The latter are registered in the January budget statement but in reality they were not transferred to the Treasury, the ministry said.

Debt servicing grew 10% y/y to LBP 309.1bn during the month due to higher domestic debt burden which increased 17% to LBP 236.3bn. Foreign debt servicing fell 7% to LBP 72.8bn.

Caretaker finance minister Mohammed Safadi already submitted an updated 2013 state budget supposedly reducing spending by LBP 2tn to LBP 21.23tn but upped the forecast budget gap for 2013 to LBP 5.247tn (USD 3.48bn) likely due to lower revenue expectation.