Key Takeaways:
- The 2024 budget’s revenues and expenditures are significantly smaller in real terms3 compared to pre-crisis budgets due to the country’s contracted economy.
- Long-term investment allocations are insufficient to support sustained economic recovery. Low public-sector wages and budgetary cuts to service ministries threaten to constrict access to public services in the coming year.
- Indirect taxes such as value-added tax (VAT) account for most tax revenues and nearly 60% of overall revenues. Indirect taxes are regressive and place a greater burden on lower-income earners than on those earning more. Direct taxes make up a significantly smaller percentage of overall taxes.
- Higher state fees – collected from residents in return for services – and reduced funding for public services such as healthcare and education will likely add to households’ financial burdens.
- The budget creates additional financial burdens for small formal sector businesses, which are at a competitive disadvantage compared to their informal sector counterparts.
- The budget will likely necessitate further aid sector support for vulnerable households and developing businesses. Assistance to address a reduction in public services will also likely be necessary.
By Crisis Analytics Team, Mercy Corps Lebanon
