Country Listing

Lebanon Table of Contents


The Budget

The government of Amin Jumayyil had to face the seemingly insuperable problem of securing revenues and curtailing expenditures in 1987. Sectarian politics made the problem even more complicated. On the revenue side, the government lost its power to collect customs receipts because the militia forces controlled the unofficial, or illegal, ports. (Illegal ports are those not under the control of the Lebanese government; no official customs duties are collected at these ports.) Militia activity also hampered the government's ability to collect direct taxes and even to collect utility fees for electricity, water, and telecommunications. During good years, however, the government was successful at collecting revenues in some areas around Beirut. But in other parts of the country, and sometimes in the Beirut area, the militias were the only revenue collectors, imposing their own tax systems on areas under their control. This situation was extensive in the area controlled by the LF. The LF set up an organization in 1980 to supervise revenue collection from approximately eight illegal ports under its control. The LF also imposed levies on a variety of private retail establishments, from hotels and restaurants to gasoline stations and shops.

On the spending side, the biggest problem confronting the government throughout the 1980s was subsidies. It had long subsidized bread and sugar, and it was reluctant to remove these subsides, which benefited the poorest group. Instead, the government targeted fuel subsidies. In November 1985, Minister of Finance Camille Shamun (also cited as Chamoun) issued a decree abolishing state subsidies on gasoline. Prices at the pump almost doubled but were still less than US$1 per gallon. (The ministry still faced a cumulative deficit of US$365 million for fuel imports at the end of 1985, equivalent to about half the national budget. Actual fuel imports that year cost US$509 million.) The price increases triggered one-day general strikes throughout the country, but the collapse of international oil prices a few weeks later helped bring prices back down. The question of fuel subsidies, however, remained unresolved. In 1986 the IMF told the government that raising local petroleum prices would be the most effective way of curbing the runaway budget deficit. The Central Bank also pushed to abolish fuel subsidies, and it informed the Ministry of Industry and Petroleum that it would stop payments for oil imports unless the ministry took action to reduce the deficit on its oil account, which the bank predicted would reach US$55 million that year.

In January 1987, the government increased fuel prices by 72 percent, but prices were still far from realistic. Before the price increase, consumers paid about seven cents per liter for gasoline. After the increase, they paid twelve cents per liter--still less than half the price commonly found in the United States, a country with one of the lowest gasoline prices in the world. In effect, such prices meant that gasoline was rationed and that when it was available, there would be an illegal surcharge. The pricing system also fostered a flourishing trade in illegal petroleum exports. Nonetheless, in June 1987 the government again rejected the possibility of terminating state subsidies on petroleum products.

Data as of December 1987