Lebanon's 2026 budget: Survival spending without a recovery plan

Report by Lea Fayad, English adaptation by Yasmine Jaroudi 

Lebanon's draft 2026 state budget projects total spending of about $6 billion, raising questions about how the government plans to allocate its expenditures and generate revenue amid a sharply reduced economy.

While the figure may appear modest, it reflects a dramatic contraction in the size of the Lebanese economy. In 2018, government spending stood at around LBP 17 trillion, while the economy was valued at roughly $55 billion in 2017. Today, economic output is estimated at just over $31 billion.

Most of the planned spending in the 2026 budget is classified as essential operating costs required to keep the state functioning. The largest share, about $3.1 billion, is allocated to public sector salaries and compensation. Before the 2019 financial crisis, the wage bill was estimated at around $6 billion annually.

The sharp decline is attributed to salaries and pensions not returning to pre-crisis levels, coupled with the departure of a significant number of public employees after the collapse of their incomes.

In addition to wages, expenditures include routine operating costs for ministries and public administrations, such as rent, transportation, electricity, office supplies, and other basic services.

Notably, the budget reflects the near absence of debt servicing costs. Lebanon has effectively stopped servicing its public debt since 2000, after debt payments previously consumed an estimated $5 billion per year.

On the revenue side, the government is projecting roughly $6 billion in income, sufficient on paper to cover expenditures and achieve a zero-deficit budget. The bulk of revenues is expected to come from taxes and fees, including income and profit taxes, value-added tax, customs duties, and other charges.

Projected revenues represent an increase of about 75% compared with what was collected in 2024. Officials attribute the rise to improved tax collection, anti-evasion measures such as the installation of scanners at ports, and the application of taxes and fees at market exchange rates.

Despite its ability to meet basic needs and avoid a deficit, the 2026 budget is widely seen as lacking a reform agenda. It does not address public debt restructuring, comprehensive public sector reform, or a fair tax overhaul that would ease the burden on lower-income groups. It also offers no clear economic or investment vision.

As a result, the budget is viewed as a tool for crisis management rather than a roadmap for economic recovery.