The Fait Accompli Budget and the Missing Reform
At its session held at the Grand Serail last Monday, September 22, the Cabinet approved the 2026 budget, which would have been nearly identical to the 2025 budget had its expenditures not risen by 13.59% over its predecessor. Total expenditures in the new draft reached 505.72 trillion Lebanese pounds, equivalent to 5.65 billion US dollars, whereas expenditures in the 2025 budget stood at only 445.21 trillion Lebanese pounds, equivalent to 4.97 billion US dollars.
In form, the Ministry of Finance adhered to the legal deadlines in preparing the state budget and subsequently referring it to the Cabinet before the end of last August. In form as well, revenues and expenditures are balanced in the new draft budget, raising questions about the reality of this balance given the omission of public debt servicing obligations, provisioning for the rescheduling of the $41 billion Eurobond portfolio, and exchange rate differences owed to Banque du Liban amounting to 16 billion US dollars, aside from the sums required for its recapitalization.
It is worth noting that the budget does not include the dues for Iraqi fuel owed by Lebanon to Iraq, the value of which now approaches 2 billion US dollars. Nor does it account for the liabilities incumbent upon the Treasury for which it must hedge, including, not least, the restitution of the remaining deposits amounting to $72 billion, in addition to scheduling a sum of $1 billion in favor of the International Monetary Fund to settle Lebanon's obligations under what are known as Special Drawing Rights, which cost the Treasury nearly $40 million annually.
Paradoxically, taxes constitute the primary source of revenue in the 2026 budget, with the projected share of taxes in total state budget revenues standing at 82.29%, estimated at 416.15 trillion Lebanese pounds. The tax revenues projected by the budget are distributed across taxes on goods and services, which account for the largest share with a contribution of 52.76% of total revenues, estimated at 266.83 trillion Lebanese pounds compared with 203.55 trillion Lebanese pounds in the 2025 budget.
Projected revenues from duties on international trade stand at 12.14% of total budget revenues, estimated at 61.38 trillion Lebanese pounds compared with 73.39 trillion Lebanese pounds in the 2025 budget law. Meanwhile, the projected share of the tax on built property and real estate is 7.12% of total revenues, estimated at 36.01 trillion Lebanese pounds compared with 29.50 trillion Lebanese pounds in the 2025 budget law.
As for projected non-tax revenues, which include revenues from Rafic Hariri International Airport, the ports, the telecommunications sector, and state-owned enterprises such as Casino du Liban and others, they account for 17.71% of total state budget revenues and are estimated at 89.57 trillion Lebanese pounds.
The draft budget raised the value of numerous fines by an average of 25 times their previous levels. It also increased obligations related to beneficial ownership disclosures in order to comply with international anti-money laundering standards, in addition to raising the penalties for non-compliance with these requirements. Furthermore, the draft budget increased the fee for issuing an identity card to 1 million Lebanese pounds instead of 5,000 Lebanese pounds, and fees for residency permits for work permit holders were likewise increased.
The draft budget imposes a 3% levy on every import transaction, with these charges treated as an advance payment toward the importer's income tax. The draft also imposes fees on foreign trucks entering Lebanon for international transport purposes, excluding trucks arriving from countries that grant Lebanon a reciprocal exemption from such fees.
Yet the fundamental paradox in the 2026 budget lies in the projected surge in revenues from the tax on salaries and wages, estimated to yield 20.18 trillion pounds, or roughly $225.7 million, accounting for 3.78% of total revenues, whereas in the 2025 budget it stood at 8.49 trillion pounds, equivalent to $95 million, representing just 1.9% of budget revenues.
On the other side, current expenditures make up roughly 89% of the total 2026 budget, with salaries and allowances, transfers, and social benefits claiming the largest share. The draft budget projects social benefits to account for nearly 25.80% of expenditures, amounting to 114.86 trillion Lebanese pounds, followed by salaries and related supplements estimated at 98.9 trillion pounds, or 22.05% of expenditures. Projected administrative expenses stand at 10.71% of expenditures, while transfers account for 12.46% of projected budget expenditures.
Projected capital expenditures, which include expropriations, are estimated at 49.4 trillion pounds, representing 11.10% of expenditures. Allocations for road maintenance in the 2026 draft state budget were raised by 3,000 billion Lebanese pounds for the maintenance of internal roads, while sums allocated to maintaining international, main, and secondary roads remained unchanged compared with the 2025 budget. The draft budget also allocated 149 billion Lebanese pounds, around 1.67 billion US dollars, for the expansion of the Port of Jounieh during 2026.
Also noteworthy is the doubling of spending under the equipment line item in the 2026 budget, from 4.54 trillion pounds in the 2025 budget to 8.9 trillion pounds, alongside additional spending under the "other equipment" item left unspecified in the text of the budget. This item covers spending on office furniture and furnishings, air-conditioning and cooling units, as well as technical equipment, which was allocated 3.13 trillion Lebanese pounds, equivalent to $36 million.
Strikingly, spending under the studies and consultations item, which includes allocations for advisers, has more than doubled, rising by 114% to reach 1.26 trillion pounds in 2026, equivalent to $14 million, whereas such spending did not exceed $6.51 million in 2025.
If the 2026 draft budget shows anything, it demonstrates that the Lebanese government remains trapped in the vortex of International Monetary Fund dictates and lacks a forward-looking vision to set Lebanon on the path to recovery. Meanwhile, the Lebanese people are waiting for the draft budget to bring a new approach to managing public funds from the moment they are collected to the moment they are spent, especially since a state budget is not merely a schedule of expenditures matched against revenues, so much as a roadmap toward economic growth and recovery.
The question remains whether real growth can be achieved with capital expenditures not exceeding 11% of the budget, bearing in mind that the purpose of these expenditures is to finance maintenance and operations. Can Lebanon leap to a real growth rate of 3.5% for 2026, the rate upon which budget revenue estimates were built according to the explanatory memorandum prepared by the Ministry of Finance, while recording both a primary surplus and an overall surplus by the end of 2026, as in the previous two years?
Had the Lebanese government been serious in its pursuit of real growth, it ought to have adjusted the salaries of civilian and military public sector employees, as well as retirees, and factored into the draft budget the additional expenditures resulting from such an adjustment. For salaries, wages, and social benefits, even if classified in the state budget under operating expenditures, are in reality the primary engine of economic revival and one of the pillars of the long-awaited reform.
Translated from Arabic with AI. Read it in Arabic