The extra revenue will come from a planned 15 per cent increase in tax receipts. Much of this will come from value-added tax (VAT), introduced in February 2002. There will also be increased revenues from higher local telephone call charges.

In the run-up to the parliamentary debate, several controversial measures introduced by Prime Minister Rafiq Hariri in his August 2002 budget proposal were scrapped. These included changes in benefits for state employees, plans to lengthen the working week and taxes on pensions. Despite opposition from Hariri and Finance Minister Fouad Siniora, the cabinet also introduced a measure which sets a ceiling for government issues of local treasury bonds to cover expenses outside the budget.

To offset some of the additional burden on the budget this created, the cabinet decided to impose a 5 per cent tax on interest from savings accounts, which is expected to generate $67 million.

The stringent budget is intended to demonstrate the government's commitment to tackling the problem of rising public debt, which reached $31,000 million at the end of 2002. This was a key condition laid down by donors at the Paris II conference in November, where the government secured some $4,400 million in concessionary loans (MEED 29:11:02).

Figures released by Banque du Liban (central bank) in mid-January show that the balance of payments recorded a $1,500 million surplus in 2002, compared with a $1,170 million deficit in 2001. This is the first time the government has posted a primary surplus in a decade.