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WEEKLY NEWSLETTER
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Lebanon
Index
The government of Amin Jumayyil had to face the seemingly
insuperable problem of securing revenues and curtailing
expenditures in 1987. Sectarian politics made the problem even more
complicated. On the revenue side, the government lost its power to
collect customs receipts because the militia forces controlled the
unofficial, or illegal, ports. (Illegal ports are those not under
the control of the Lebanese government; no official customs duties
are collected at these ports.) Militia activity also hampered the
government's ability to collect direct taxes and even to collect
utility fees for electricity, water, and telecommunications. During
good years, however, the government was successful at collecting
revenues in some areas around Beirut. But in other parts of the
country, and sometimes in the Beirut area, the militias were the
only revenue collectors, imposing their own tax systems on areas
under their control. This situation was extensive in the area
controlled by the LF. The LF set up an organization in 1980 to
supervise revenue collection from approximately eight illegal ports
under its control. The LF also imposed levies on a variety of
private retail establishments, from hotels and restaurants to
gasoline stations and shops.
On the spending side, the biggest problem confronting the
government throughout the 1980s was subsidies. It had long
subsidized bread and sugar, and it was reluctant to remove these
subsides, which benefited the poorest group. Instead, the
government targeted fuel subsidies. In November 1985, Minister of
Finance Camille Shamun (also cited as Chamoun) issued a decree
abolishing state subsidies on gasoline. Prices at the pump almost
doubled but were still less than US$1 per gallon. (The ministry
still faced a cumulative deficit of US$365 million for fuel imports
at the end of 1985, equivalent to about half the national budget.
Actual fuel imports that year cost US$509 million.) The price
increases triggered one-day general strikes throughout the country,
but the collapse of international oil prices a few weeks later
helped bring prices back down. The question of fuel subsidies,
however, remained unresolved. In 1986 the IMF told the government
that raising local petroleum prices would be the most effective way
of curbing the runaway budget deficit. The Central Bank also pushed
to abolish fuel subsidies, and it informed the Ministry of Industry
and Petroleum that it would stop payments for oil imports unless
the ministry took action to reduce the deficit on its oil account,
which the bank predicted would reach US$55 million that year.
In January 1987, the government increased fuel prices by 72
percent, but prices were still far from realistic. Before the price
increase, consumers paid about seven cents per liter for gasoline.
After the increase, they paid twelve cents per liter--still less
than half the price commonly found in the United States, a country
with one of the lowest gasoline prices in the world. In effect,
such prices meant that gasoline was rationed and that when it was
available, there would be an illegal surcharge. The pricing system
also fostered a flourishing trade in illegal petroleum exports.
Nonetheless, in June 1987 the government again rejected the
possibility of terminating state subsidies on petroleum products.
Data as of December 1987
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