BEIRUT: Lebanon’s 2027 budget asks a shrinking economy to deliver tax revenue more than double what it collected in 2024, a target one economist calls unrealistic, while the country has yet to settle how the losses from its banking crisis will be shared.

The Numbers Behind the Draft

The Ministry of Finance has submitted a draft 2027 budget of $6.87 billion, up 14.2 percent from 2026, with taxes supplying 85.9 percent of revenue. Capital spending is limited to $745 million, or 10.8 percent of total expenditure, while wages, salaries and social benefits take 53.5 percent.

The Council of Ministers adopted the draft on Oct. 1, as the International Monetary Fund pressed Lebanon to pass key reforms, including a financial gap law, to secure a support programme.

A Target Set Against the Trend

The budget assumes revenue will keep rising while the economy contracts. The World Bank’s August Lebanon Economic Monitor projects a 6.4 percent contraction in 2026, after growth of 4.2 percent in 2025.

To reach its goal, the government would need to collect 100.9 percent more than the $3.41 billion raised in 2024. Economist Jassem Ajaka told Arab News the gap was “highly unrealistic.”

He pointed to three obstacles: weaker consumer purchasing power, revenue growth driven by higher nominal fees and import prices instead of real activity, and enforcement measures that reach only taxpayers already inside the system.

Enforcement Over Wider Reach

The draft relies on new enforcement tools rather than measures that widen the tax base. These include cross-checking payroll and social security declarations, requiring non-resident digital service providers to appoint local tax representatives, and an invoice-based lottery to encourage people to ask for receipts. Streaming platforms are now subject to 11 percent VAT.

Income tax receipts from salaries and wages are projected to rise 66 percent, compared with just 22 percent for tax on business profits, a split that shows where enforcement actually bites. Ajaka said these steps may squeeze revenue from businesses already complying with the law, but do nothing to draw large parts of the informal economy into the tax net.

Fee Increases Reinforce the Pattern

Some fee changes are steep. The national ID card fee rises 200-fold under Article 55, from 5,000 Lebanese pounds ($0.056) to 1 million pounds. The line for fees on inflammable materials, including the internal fuel levy introduced in February, rises more than 870 percent to $363.5 million.

Ajaka described these as nominal catch-ups for currency depreciation as much as new revenue, which is part of why he doubts the target will hold once purchasing power is taken into account.

Who Pays for the Banking Losses?

“Collection without spending is just levying,” said Mohamad Farida, economic adviser to the Depositors’ Union in Lebanon, whose members have been locked out of their savings since the 2019 financial collapse.

Ajaka said budget execution produced a surplus of about $1 billion in 2025, and public-sector deposits at Banque du Liban reached around $10.26 billion by the end of August 2026. That liquidity helps stabilize the pound and fund depositor payouts, he said. But without a gap law allocating banking-sector losses among the central bank, the banks and the state, any state contribution is not formally recorded as recapitalization. In effect, he argued, taxpayers carry the cost through consumption taxes and tight public spending, while bank shareholders avoid dilution and write-downs.

Arab News asked Banque du Liban how it uses public-sector deposits and whether they amount to a state contribution to bank recapitalization. The central bank had not responded by the time of publication.

The Legal Deadlock

Attorney Jihad Chidiac said the main obstacle to passing the gap law is deciding who bears the losses: the central bank, the commercial banks, the state, or all three. “Each side has sought to protect its own position and limit the share of losses it would ultimately have to absorb,” he said.

The law cannot move apart from bank restructuring legislation, he added, because depositors’ recoveries depend on the banks’ solvency. Meanwhile, public-sector deposits remain ordinary claims against the central bank, with no statute setting how they rank beside its other liabilities. If the state demanded full value while the central bank lacks the assets to pay, someone would have to absorb the shortfall.

What Would Close the Gap

For depositors, Farida said, the starting point is an audit. “We need to start knowing the numbers,” he said.

Ajaka listed a broader set of reforms: enacting the banking resolution and gap laws, auditing the central bank and bank balance sheets, opening formal talks with Eurobond holders, moving toward a funded IMF programme and publishing audited closing accounts.

Farida is skeptical that change will come without a reckoning. “Even with the IMF it looks like a hard exit if there is no confrontation,” he said. IMF spokesperson Julie Kozack told reporters the budget and medium-term fiscal framework must be consistent with debt sustainability for the country.

What to Watch

Parliament’s handling of the budget will be the next test, along with any movement on the gap law and bank restructuring legislation. If revenue falls short of the target, the government faces a choice between cutting spending, raising taxes further or leaning on its deposits at the central bank. For households and businesses already stretched, the outcome will shape how much of the burden lands on them.

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