Fiscal Adjustment during Political Turmoil: Fiscal Burden of Lebanese Government’s Economic Reform Program Ms. Sherine Shallah Economic Officer, Office of the Minister of Finance LEA Founding Member LEA’s inaugural policy roundtable: “PARIS 3 AND THE POST- WAR LANDSCAPE: LEBANON’S ECONOMIC POLICY IMPERATIVES”
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Fiscal Adjustment during Political Turmoil: Fiscal Burden of Lebanese Government’s Economic Reform Program Ms. Sherine Shallah Economic Officer, Office.
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Fiscal Adjustment during Political Turmoil: Fiscal Burden of Lebanese
Government’s Economic Reform Program
Ms. Sherine ShallahEconomic Officer, Office of the Minister of Finance
LEA Founding Member
LEA’s inaugural policy roundtable: “PARIS 3 AND THE POST-WAR LANDSCAPE: LEBANON’S ECONOMIC POLICY IMPERATIVES”
The Lebanese Government has approved an economic program that involves fiscal adjustment of 4,366 billion LL
• Primary deficit in 2006: 220 billion LL• Projected primary surplus in 2011: 4,146 billion LL
• Primary deficit in 2006: 220 billion LL• Projected primary surplus in 2011: 4,146 billion LL
Fiscal adjustment over the period 2007-2011: 4,366 billion LL
Fiscal adjustment over the period 2007-2011: 4,366 billion LL
The gradual uncapping of the gasoline excise will yield 590 billion LL
• Excise rate will be raised from 250 LL/liter (as of January 2, 2007) to 300LL/ liter at the end of 2007
• Excise rate will be raised by approximately 50 LL/liter per year over 2008-2011 to 490 LL /liter in 2011
• Additional burden to consumers per year from 2007 to 2011: 1,000LL/liter
• Additional revenues of 290 billion LL in 2007 (small base)• Additional revenues of 75 billion LL/year from 2008-2011
• Excise rate will be raised from 250 LL/liter (as of January 2, 2007) to 300LL/ liter at the end of 2007
• Excise rate will be raised by approximately 50 LL/liter per year over 2008-2011 to 490 LL /liter in 2011
• Additional burden to consumers per year from 2007 to 2011: 1,000LL/liter
• Additional revenues of 290 billion LL in 2007 (small base)• Additional revenues of 75 billion LL/year from 2008-2011
Total fiscal burden of gasoline excise uncapping over the period 2007-2011: 590 billion LL
Total fiscal burden of gasoline excise uncapping over the period 2007-2011: 590 billion LL
The increase in income tax will yield 294 billion LL, out of which 171.5 billion LL will be borne by citizens
• Interest rate tax will be raised from the current 5% to 7% in 2008
• Tax levied on interest revenue from deposits and debt securities
• Incremental tax burden on LL depositors: 0.15%• Incremental tax burden on US$ depositors: 0.11%• Revenue yield from deposit base (2008 base): 170 billion LL• Revenue yield from debt securities (2008): 124 billion LL• Revenue yield from debt securities borne by individual TB
holders: 1.5 billion LL
• Interest rate tax will be raised from the current 5% to 7% in 2008
• Tax levied on interest revenue from deposits and debt securities
• Incremental tax burden on LL depositors: 0.15%• Incremental tax burden on US$ depositors: 0.11%• Revenue yield from deposit base (2008 base): 170 billion LL• Revenue yield from debt securities (2008): 124 billion LL• Revenue yield from debt securities borne by individual TB
holders: 1.5 billion LL
Total fiscal burden of income tax in 2008: 171.5 billion LL
Total fiscal burden of income tax in 2008: 171.5 billion LL
The increase in VAT rate will yield 1,047 billion LL
• VAT increase from 10% to 12% in 2008• VAT increase from 12% to 15% in 2010• 50% of household consumption exempt• Incremental burden of VAT increase from 10% to 12%
in 2008: 1% of spending (387 billion LL)• Incremental burden of VAT increase from 12% to 15%
in 2010: 1.5% of spending (660 billion LL)
• VAT increase from 10% to 12% in 2008• VAT increase from 12% to 15% in 2010• 50% of household consumption exempt• Incremental burden of VAT increase from 10% to 12%
in 2008: 1% of spending (387 billion LL)• Incremental burden of VAT increase from 12% to 15%
in 2010: 1.5% of spending (660 billion LL)
Total fiscal burden of VAT: 1,047 billion LLTotal fiscal burden of VAT: 1,047 billion LL
Out of the fiscal adjustment of 4,366 billion LL, the total incremental tax burden on citizens will be 1,809 billion LL
• Total fiscal burden of gasoline excise uncapping over the period 2007-2011: 590 billion LL
• Total fiscal burden of income tax in 2008: 171.5 billion LL• Total fiscal burden of VAT: 1,047 billion LL
• Total fiscal burden of gasoline excise uncapping over the period 2007-2011: 590 billion LL
• Total fiscal burden of income tax in 2008: 171.5 billion LL• Total fiscal burden of VAT: 1,047 billion LL
Total incremental tax burden on citizens over the period 2007-2011: 1,809 billion LL
Total incremental tax burden on citizens over the period 2007-2011: 1,809 billion LL
The core of the Government’s efforts ahead of and beyond the upcoming donor conference are sectoral
Vision for growth - 2015
Vision for growth - 2015
Reform strategies for the main
infrastructure and social sectors, with
actions to be conducted by government
Reform strategies for the main
infrastructure and social sectors, with
actions to be conducted by government
Sector Strategies Sector Strategies
Sector-specific growth
recommendations and vision for the
future for the next 10 years
Sector-specific growth
recommendations and vision for the
future for the next 10 years
Medium-Term Economic Reform
Program
Medium-Term Economic Reform
Program
Comprehensive Medium-term
economic reform program to solve
main issues faced by Lebanon, with international
assistance
Comprehensive Medium-term
economic reform program to solve
main issues faced by Lebanon, with international
assistancePrivate sector recovery planPrivate sector recovery plan Fiscal reform planFiscal reform planSocial reform planSocial reform plan
New strategy for fiscal reform and
public finance modernization
New strategy for fiscal reform and
public finance modernization
Comprehensive program for the recovery of the
private sector, with financial support, tax
incentives and promotion
Comprehensive program for the recovery of the
private sector, with financial support, tax
incentives and promotion
Agenda for reform and development of social safety nets,
and improvement of service delivery
Agenda for reform and development of social safety nets,
and improvement of service delivery
The Government’s fiscal consolidation will come in its most part from the reform of key sectors
Government’s approval of Integrated Water Sector Strategy & Policy
Actions Planned for 2007Actions Planned for 2007
Develop an integrated water sector strategy and policy Develop an integrated water sector strategy and policy
The Government also plans to increase water resources and improve their management
Completed ActionsCompleted Actions
World Bank Irrigation Sector Note
MEW Water Resources 10 Year Plan. (Cabinet Approved)
MEW 10 Year Programme:
Shabrouh Dam
Brissa Dam
Extension of Dbayeh Water Treatment Plant
World Bank Irrigation Sector Note
MEW Water Resources 10 Year Plan. (Cabinet Approved)
MEW 10 Year Programme:
Shabrouh Dam
Brissa Dam
Extension of Dbayeh Water Treatment Plant
Review role of water establishments in irrigation particularly in view of concern over water establishments’ ability to develop, operate and maintain irrigation systems. Detailed Review of investment programme for MEW, CDR, LRA & water establishments Establishing an Integrated Water Resources Management System (MEW) Opening of tenders for Canal 800 Appointment of consultant to update the studies relating to Awali-Beirut Conveyor, Bisri DamAppointment of a committee of experts to recommend guidelines for re-use of treated wastewater. Appointment of a committee of experts to recommend guidelines for re-use of treated wastewater Launching Boqaata DamLaunching Assi Dam
Review role of water establishments in irrigation particularly in view of concern over water establishments’ ability to develop, operate and maintain irrigation systems. Detailed Review of investment programme for MEW, CDR, LRA & water establishments Establishing an Integrated Water Resources Management System (MEW) Opening of tenders for Canal 800 Appointment of consultant to update the studies relating to Awali-Beirut Conveyor, Bisri DamAppointment of a committee of experts to recommend guidelines for re-use of treated wastewater. Appointment of a committee of experts to recommend guidelines for re-use of treated wastewater Launching Boqaata DamLaunching Assi Dam
Actions Planned for 2007Actions Planned for 2007
Increase water resources and improve resource management Increase water resources and improve resource management
The Government’s foreseen strategy includes improving service coverage…
Completed ActionsCompleted Actions
MEW & CDR NERP 2 & 3 Programmes
CDR Wastewater Programmes: Coastal Water Protection and Protection of Water Resources.
South Bekaa Irrigation Phase 1
Qasmieh Irrigation Project
MEW & CDR NERP 2 & 3 Programmes
CDR Wastewater Programmes: Coastal Water Protection and Protection of Water Resources.
South Bekaa Irrigation Phase 1
Qasmieh Irrigation Project
Continue programmes extending water supply, wastewater and irrigation services.
Complete repair of war damaged facilities
Continue programmes extending water supply, wastewater and irrigation services.
Complete repair of war damaged facilities
Actions Planned for 2007Actions Planned for 2007
Improve service coverage Improve service coverage
…and improving sector governance
Completed ActionsCompleted Actions
Law 221 and its amendments
Decrees (By-Laws) October 2005
IPP Water
Tripoli Water Authority Management Contract
LWPP
TSU Bekaa Water Authority (WB)
Law 221 and its amendments
Decrees (By-Laws) October 2005
IPP Water
Tripoli Water Authority Management Contract
LWPP
TSU Bekaa Water Authority (WB)
Appoint Boards and DGs for all Water establishmentsDefine roles of different stakeholdersWater establishments set policies, criteria and procedures in areas such as investment programmes, human resources, o & m, customer services. Establish Water Users Associations for irrigationWater establishments develop Business PlansDevelop three year investment programmes with 2008 Budget. Establish a regulatory framework to include dispute resolution mechanism, tariff adjustments and service standards Government and MEW establish clear policy on cost recovery and subsidies for sector Appoint a consultant to study PPP options for Nth. Lebanon Water EstablishmentMEW and Water establishments to set measures that will enable the water establishments to operate and maintain water and wastewater facilities till private operators are contracted.Complete the adaptation of MIS established in Bekaa Water Establishment, South Lebanon Water Authority by IPP Water and LWPPIPP Water to implement capacity building measures it recommended in its Water Sector Policy and Action Plan
Appoint Boards and DGs for all Water establishmentsDefine roles of different stakeholdersWater establishments set policies, criteria and procedures in areas such as investment programmes, human resources, o & m, customer services. Establish Water Users Associations for irrigationWater establishments develop Business PlansDevelop three year investment programmes with 2008 Budget. Establish a regulatory framework to include dispute resolution mechanism, tariff adjustments and service standards Government and MEW establish clear policy on cost recovery and subsidies for sector Appoint a consultant to study PPP options for Nth. Lebanon Water EstablishmentMEW and Water establishments to set measures that will enable the water establishments to operate and maintain water and wastewater facilities till private operators are contracted.Complete the adaptation of MIS established in Bekaa Water Establishment, South Lebanon Water Authority by IPP Water and LWPPIPP Water to implement capacity building measures it recommended in its Water Sector Policy and Action Plan
The Government also aims to promote private sector participation in the water sector
Completed ActionsCompleted Actions
Tripoli Water Authority Management contract
Baalbeck-Nabi Chit Service Contract (O & M)
Operation and maintenance contracts for wastewater treatment plants under construction
Tripoli Water Authority Management contract
Baalbeck-Nabi Chit Service Contract (O & M)
Operation and maintenance contracts for wastewater treatment plants under construction
Appoint a consultant to MEW, CDR and water establishments to develop model tender and contract documents for service and management contracts (with WB assistance)
Above consultant to develop model contracts for regulation or supervision of such contract,
Appoint a consultant to MEW, CDR and water establishments to develop model tender and contract documents for service and management contracts (with WB assistance)
Above consultant to develop model contracts for regulation or supervision of such contract,
In addition, the Government has drawn a transport strategy that covers seaports,…Strategy of Ministry of Public Works and Transportation in relation to
SeaportsStrategy of Ministry of Public Works and Transportation in relation to