The Ministry of Finance’s 2027 draft budget sets revenue and expenditure at USD 6.871bn and targets a headline zero deficit.
Cabinet is still reviewing the draft and reportedly decided to incorporate additional compensation for public-sector employees. How these additional costs will be financed remains unclear.
Following its recent visit to Beirut, the IMF welcomed the balanced-budget target and stronger tax compliance, while warning against further ad-hoc wage and pension increases without compensating revenues.
While we await the revised version emerging from Cabinet, we highlight below some of Kulluna Irada’s key takeaways from the 2027 draft budget.
The full analysis is available in the complete brief below.
KEY TAKEAWAYS
• Despite being presented as a transition budget, the 2027 draft remains essentially a baseline scenario. It does not yet incorporate the fiscal consequences of banking and sovereign-debt restructuring, nor an investment and social-spending response commensurate with Lebanon’s recovery and reconstruction needs.
• De facto state fiscal surpluses (USD 1bn in 2025) have become an off-budget financing channel that amounts to a silent bailout of the banking system, as these surpluses add to public-sector deposits at BDL and support monetary stabilisation and depositor payouts. In the meantime, the State’s contribution to bank restructuring remains undefined and bank shareholders remain insulated from the cost of the delayed restructuring.
• Part of the nominal increase in spending reflects funding adjustments for inflation and public-sector compensation rather than an expansion in real State capacity. As a result, the larger budget envelope does not translate into a commensurate increase in public services, social protection or investment.
• There is still no clear measure of the State’s overall liabilities, including the defaulted Eurobonds. More than six years after the 2020 default, debt-restructuring negotiations with bondholders have yet to begin. As such, budgeted debt service understates the State’s real financial burden.
• Wages, salaries and social benefits still absorb more than half of the budget. Personnel-related spending is concentrated largely outside the core civil administration, notably in the military and security services and in pensions for retirees.
• Capital spending remains constrained at 10.8% of the budget, and is largely focused on maintenance, rehabilitation, equipment and existing commitments, despite Lebanon’s massive investment and reconstruction needs.
• The 2027 revenue target effectively doubles actual 2024 collections, from USD 3.419bn to USD 6.871bn. Tax revenues reach close to 86% of total revenues, while the draft focuses more on compliance and traceability than on structural tax reform.
• Procedural regularity has improved, but fiscal transparency has not. The draft was prepared within the legal timetable and introduces a 2027–2030 medium-term framework, but the 2025 closing accounts remain unavailable and a range of permanent tax and administrative rules are again being adopted through the annual budget law without a clear policy framework.
