More extra-budgetary spending
Lebanon’s Council of Ministers agreed to approve extra budgetary spending of LL11.5 trillion ($7.7 billion) for the rest of the year, a 12 percent increase on LL10.3 trillion ($6.9 billion) that had been agreed earlier in June. Lebanon has been without a budget since 2005 and the debate over extra-budgetary spending has severely hampered the government’s ability to function. Despite attempts from the opposition to block the cabinet’s decision it is believed that President Michel Sleiman has agreed to sign into law the overspending bill even if it is not passed in parliament. The released figures show that the government allocated LL1.79 trillion ($1.19 billion) for salaries and wages, LL4.23 trillion ($2.82 billion) for subsidies and transfers LL1.47 trillion ($980 million) for debt servicing and financial charges. The cabinet also took a decision to allocate LL150 billion ($100 million) to development projects in Tripoli and LL450 billion ($300 million) for similar initiatives in other areas of the country. It is anticipated that the government will finance the expenditures through the issuance of treasury bonds. Lebanon’s sovereign debt is approximately $54 billion, which amounts to a debt-to-gross domestic product ratio in the range of 140 percent.
More traffic in productsand people
Activity at the port of Beirut, which is a good indicator of the vitality of the trade sector, increased on a yearly basis. The volume of merchandise loaded and unloaded at the port reached 2,851 tons in the first five months of 2012, representing an 8 percent increase on the same period last year. What is more, the number of containers at the port went up 5.3 percent over the same period to year-on-year to reach a total of some 249,600. A corresponding rise in traffic for January to May was recorded at the Rafiq Hariri International Airport. The number of aircraft passing through the airport went up by 2.9 percent year-on-year to 25,000 planes, while the number of passengers increased by a significantly higher proportion of 15.6 percent, tallying 2.21 million in the five-month period. The volume of freight at the airport also registered an increase. The cargo unloaded rose year-on-year 9.1 percent to 18,200 tons, while the cargo loaded increased 7.7 percent to 12,350 tons.
Trade deficit balloons
Lebanon’s trade deficit increased by a third for the first quarter of 2012 compared to the same period in 2011. Total imports reached $6 billion while exports were $1.15 billion, constituting a deficit of $4.8 billion. The deficit is the highest recorded in five years in terms of both volume and value despite an increase of $199 million in exports over the same period last year. The average monthly deficit in the first quarter was $1.6 billion with an average value of $2 billion in imports and $385 million in exports. The main factor behind the rise in the value of imports was a higher minerals, fuels and oil bill. The rise in receipts for exports was primarily due to an increase in the international silver and gold prices, with exports of unwrought gold, un-mounted diamonds and precious metals increasing in value by 86 percent, or $249 million, from the first quarter last year. Excluding this buoyant sub-sector, the value of exports actually dropped 8 percent to their lowest level in nominal terms for the past five years. The drop was most pronounced in exports to other Arab countries.
The blackouts of summer
Severe electricity rationing gripped much of Lebanon as the nation’s power production crisis intensified in late June. The hours of electricity rationing were significantly increased following breakdowns at power plants in the north and the south of the country. The cabinet met to discuss a plan agreed in late March to lease, for a maximum of three years, power-generating barges to produce 270 megawatts, and to construct power plants producing up to 1,500 megawatts, in order to meet some of Lebanon’s current production deficit of up to 1400 MW. The government signed a deal with a Turkish company, Karadeniz, in April, to provide the first barge in August and the second a few months later. However, the deal had been left pending because, according to the Minister of Finance Mohammad Safadi, the company had failed to meet the government’s terms. Implementation of the contract is expected to begin soon after the cabinet’s approval at a session in late June. The nation’s electricity provider, Électricité du Liban, has also been rocked by protracted strikes from workers, severely affecting bill collection and power plant repairs. The Minister of Energy and Water Gebran Bassil said that all of Lebanon may experience power cuts of up to 15 hours per day when demand peaks in the height of summer.
Municipal defense force for Dahieh
Lebanon’s first local civil defense operation is being established in Beirut’s densely populated and largely impoverished southern suburbs to fill the void left by the central government’s failing emergency services. The center is intended to offer support for emergencies including fires, natural disasters and war. The municipalities are purchasing a small fleet of fire trucks and emergency vehicles and are training firefighters, paramedics, drivers and administrators. The $10 million civil defense center in the Ghobeiri municipality will be the first of its kind operating independently from the National Civil Defense. The center will serve the neighboring municipalities of Burj Al Barajneh, Haret Hareik and Mreijeh. It is part of trend within municipalities to step in and cover for the failings of central government. The decision to move away from the National Civil Defense structure was a result of municipalities noticing slow emergency responses to a number of incidents around the country and follows similar local civil defense motivates in Italy, the United Kingdom, Turkey and Iran. The bulk of the funding has come from the Kuwait Fund for Arab Economic Development, with the remainder coming from The Municipal Unions. It is anticipated that the center will work in the coming few months to establish an infrastructure response team to treat breakdowns in the suburbs’ ailing water and electricity networks.
Our failing nation
Lebanon ranked 45th in the 2012 ‘failed states index’, moving one place up from its 2011 spot at number 44. The survey, which includes 177 countries, is compiled by the The Fund for Peace and published by Foreign Policy. The index assesses a number of factors to determine the stability of states, including demographic pressures, poverty and economic decline, group grievance, uneven development, legitimacy of the state and external intervention. Scores are given with 10 being the worst, or ‘failed’, and one being the best, or most stable, and Lebanon’s report card was most damning regarding: factionalized elites (9.1), security apparatus (8.4), group grievance (8.4) and refugees and internally displaced people (8.2). Lebanon’s overall score of 85.8 out of 100 places it firmly in the third-worst category “alert” out of a total of eight. Neighboring Syria slid up the ranks in the failed state index, from 48th in 2011 to 23rd in the 2012 survey.
