Lebanon’s 2026 draft budget arrives with the appearance of order but without the substance of strategy. It exhibits procedural coherence—tables aligned, totals balanced, legal chapters filled—yet the structure beneath these numbers remains weak. The budget balances on paper but rests on assumptions that are neither disclosed nor defensible. Versions released within days of each other diverge by margins large enough to undermine credibility. The document presents a performance of planning rather than a plan: numerical symmetry masking the absence of economic reasoning.

This pattern has become familiar. Instead of using the budget to articulate priorities, direct resources, or manage risks, the state continues to treat budgeting as a technical requirement rather than a tool of governance. What emerges is form without depth—an annual exercise in producing a document rather than shaping a fiscal vision.

Lebanon’s constraints are real—fiscal, political, administrative, and institutional. Yet these limits do not eliminate the state’s capacity to choose; they simply make the tradeoffs of each decision more acute. In this sense, the challenge is not only the lack of resources but also the balance of power that shapes how scarce resources are allocated. What is often framed as technical scarcity is, in practice, the outcome of political choices. As a result, the real deficit lies less in available funds than in how priorities are set, decisions are sequenced, and policies are designed. Within the same resource envelope, the 2026 budget could have been conceived in ways that are fairer in distributing burdens, more credible in presenting its assumptions, more stabilizing in its treatment of inflation and arrears, and more aligned with the government’s own stated commitments—particularly reconstruction, social protection, and institutional renewal.

Now that the 2026 budget is in parliamentary committee for review and approval members of parliament and political parties have the chance to correct the gaps, not through grand reforms or new spending, but through targeted adjustments that give the budget a purpose it currently lacks. Such adjustments concern where the burden of taxation falls, how reconstruction and social protection are treated, and whether key oversight and service-delivery institutions are given just enough capacity to function. Their impact would be reflected not in dramatic shifts, but in small, traceable changes in who pays, who benefits, how risks are reported, and whether essential services become marginally more reliable. It is along these modest but measurable lines that the analysis which follows reads the 2026 budget and assesses whether, even under tight constraints, small corrections can make a real difference.

Diagnosing the Structure: What the Numbers Reveal About Power and Purpose

A close look at the 2026 budget’s revenue and expenditure structure makes clear that the document is not simply the result of fiscal scarcity or administrative weakness. It reflects a hierarchy of power and purpose that shapes who carries the burden of the state and who benefits from its spending. When the numbers are read together, how revenues are raised and how expenditures are allocated, a consistent political economy emerges, one that protects insiders and rent-rich sectors while leaning heavily on households to finance the system.

The revenue structure is the first and clearest expression of this imbalance. The 2026 draft derives only 17.5 percent of its total revenues from direct taxation, while 64.6 percent comes from indirect taxes and another 17.9 percent from non-tax revenues. When these revenues are classified by their distributional impact, the imbalance becomes even sharper: only 13 percent of the total tax revenues are collected from progressive instruments, while 87 percent comes from regressive ones. In practical terms, the state continues to rely overwhelmingly on consumption taxes, which means the burden falls disproportionately on low-income households rather than on wealth, capital income, property, or economic rents. This structure is not merely a technical outcome; it reflects the prevailing balance of power, one that favors avoiding the deeper reforms that effective taxation of wealth, capital, and rents would require.

The incidence of taxation confirms the extent of this imbalance. Low-income households contribute roughly 25 percent of total tax revenue, and middle-income households’ 40 percent; together, the bottom ninety percent of the population finance nearly two-thirds of the state.  While high-income groups contribute only 28 percent, a disproportionately modest share given the country’s extreme concentration of wealth. This is not an accident of measurement but a reflection of political economy: those in power choose to tax consumption because it is the easiest and least resistant base to tap, while capital and property—disproportionately concentrated among wealthy and politically protected groups—remain exempt or undertaxed.

In earlier decades, this imbalance could be—at least partially—rationalized by the logic of the pre-crisis economic model, which depended on attracting capital inflows, especially bank deposits. Under that model, taxing wealth meaningfully was seen as incompatible with an economy built on drawing money in rather than generating it. The argument held that if wealth were taxed, it would simply leave the country. But that very logic helped entrench a system that deepened tax inequalities, shifted most of the burden onto wages and salaries, and allowed wealth holders to accumulate additional gains at the expense of the broader society.

Today, however, that justification no longer holds. The financial system that once claimed to require the protection of capital has collapsed, and a cash-based, informal economy has taken root in its place. In such a landscape, it is difficult to understand how the continuation of the same tax policy can still be defended—how the state can continue to rely on a structure designed for a model that no longer exists. The persistence of that structure now reflects political inertia—not strategy—as those who benefited from the old model continue to resist reforms that would redistribute the tax burden more equitably.

The public spending side entrenches the same hierarchy. The bulk of public expenditure flows to groups embedded within the state: public sector employees, security personnel, and councils and institutions with political connections. By contrast, low-income households receive less than 10 percent of total public spending and obtain only a limited share of basic services such as health, education, social protection, or targeted transfers. Retirees outside the military and public sectors are also largely absent from the allocation map, reflecting the system’s extremely narrow definition of its social base. Social protection remains fragmented and of limited effectiveness, while the budgets of education and health function more as a form of indirect support for public sector employees than as a means of expanding access for low-income groups. Capital spending, which is supposed to support economic recovery, is so limited and poorly targeted that it is unable to generate any meaningful economic impact.

Reconstruction spending illustrates this imbalance most starkly. Despite extensive war-related destruction, the draft allocates only about 225,000 dollars to the Higher Relief Council, which is intended to prevent future aggression and roughly 25 million dollars to the Council of the South, with only a small portion directed to reconstruction. These sums are negligible relative to documented damage and fall far short of what would be required to begin restoring affected communities. The effect is not only practical but political: it signals to communities that the state remains absent even after war.

Oversight institutions, which could anchor credibility and accountability, are similarly marginalized. The Court of Accounts, Central Inspection, and the Central Administration of Statistics receive allocations too small to restore their operational capacity so they can generate the data for the government to produce better policies and for parliament to monitor and evaluate these policies. Without these institutions, the promise of reform collapses into opacity.

Taken together, the revenue and expenditure sides of the 2026 draft reveal a consistent pattern. The budget protects insiders over households, financial wealth and rent-rich activities over wages and pensions, and maintenance over recovery. It manages survival rather than rebuilding, preserving the fiscal architecture that preceded the crisis rather than adapting to the economic and social collapse that followed. What the numbers show is not only a technical imbalance but a political one: a state that redistributes upward through its tax system and inward through its spending, even as it faces one of the most unequal and vulnerable economic landscapes in its modern history.

What Parliament Can Still Improve: Realistic, Low-Cost, High-Impact Fixes

One of the defining weaknesses of the 2026 draft budget is the widening distance between the priorities set out in the government’s ministerial statement and the allocations that appear in the document itself. The statement framed reconstruction as a national obligation, administrative reform as a central pillar of recovery, and defense capability as a precondition for sovereignty. Yet when the numbers are examined, these stated priorities dissolve into symbolic lines and maintenance budgets.

Parliament cannot rewrite the budget, but it can close part of this gap by correcting the most damaging inconsistencies, especially those where the state’s own commitments are contradicted by its numbers. What is needed is better choices: limited, feasible, and targeted amendments that align the budget with the country’s urgent needs and its stated policy direction.

A first domain where Parliament can intervene is credibility. The budget suffers from the same structural opacity that has characterized fiscal management for years: shifts of nearly fifteen percent between successive versions with no explanation, the absence of macroeconomic assumptions, and a “zero deficit” that exists only by excluding arrears and off-budget obligations. This lack of transparency mirrors a broader pattern in the public sector, where commitments in ministerial statements routinely dissolve in the details of appropriations. Parliament can correct this at no cost by requiring a table that reconciles differences between versions, an annex detailing macro-fiscal assumptions, a statement of fiscal risks covering contingent liabilities in electricity, public health and judicial claims, and strict ceilings on transfers to limit the executive’s discretionary reallocations. These measures transform the draft from a numerical exercise into a defendable plan.

But even with these disclosures, one of the most pressing gaps remains the claim of a “zero deficit. The draft excludes loans and contributions from its revenue base, even though they are part of the state’s financing structure. At the same time, public-sector deposits at the Central Bank have increased by nearly two billion dollars since the beginning of 2025, a shift that cannot be explained with the information currently available. On the surface, one may attribute part of this increase to expected external loans and contributions—roughly 560 million dollars—and to the estimated 480-million-dollar primary surplus of the 2024 budget. But this still leaves close to one billion dollars unaccounted for. The most plausible explanation is that actual spending has been significantly lower than what the budget authorizes, but without transparent reporting, even this remains speculative. Parliament should therefore require a complete full financial reconciliation that clarifies the sources of financing and the true execution of expenditures. Without this, the headline “zero deficit” becomes a statistical construct rather than a fiscal reality, and the budget remains a document that conceals more than it reveals.

Reconstruction is another domain where realism and responsibility can be restored, and where the stakes extend far beyond physical repair. The government framed reconstruction as both a national duty and a strategic priority after the war, a core component of restoring sovereignty over its territory and demonstrating that the state—not external actors—can protect and rebuild its communities. Yet the allocations tell another story. No dedicated fund, no multi-year plan, and no transparent reporting mechanism exist to coordinate recovery or mobilize donor support. This absence not only delays reconstruction but also weakens the state’s claim to sovereignty, leaving affected regions vulnerable to external influence and eroding what remains of public confidence in national institutions.

Parliament can correct this by establishing a rules-based Reconstruction Fund capitalized at one to two percent of total expenditure. Such a fund would activate automatically under clearly defined triggers, operate under credible procurement oversight, and draw part of its financing from newly priced coastal and environmental rents. This is not additional spending; it is the rational reallocation of existing discretionary reserves into a mechanism that communities—and donors—can trust. By doing so, Parliament would signal that reconstruction is a sovereign responsibility, carried out through national institutions rather than outsourced or politicized, and that the state is capable of rebuilding not only infrastructure but also the social contract through which citizens regain faith in the purpose and legitimacy of public policy.

Defense spending exhibits a similar disconnect between rhetoric and allocation. While sovereignty is repeatedly tied to a stronger army and secure borders, nearly the entire increase in military spending is absorbed by personnel costs. Investment in equipment, training, and operational capabilities barely registers. This is more than a budgetary imbalance: building the army’s infrastructure, armament, and technological capacity is not a discretionary option but a foundational requirement for protecting the state’s sovereignty. At this moment in particular, investing in the army’s capabilities is essential for negotiating from a position of strength in a region marked by shifting dynamics and recurrent tensions. An underfunded army becomes vulnerable to external leverage, targeted influence, and political pressure precisely because it lacks the resources to operate independently. Military investment, therefore, is not a luxury; it is a national investment that must remain national, not a dependence on foreign funding that risks turning defense into another arena of external intervention. Parliament cannot undo decades of underinvestment in one cycle, but it can tie any future increases in the security budget to clear capability-building benchmarks and transparent reporting, so that defense spending shifts from mere survival to effective deterrence.

Administrative and judicial reform, marketed under the banner of “Reform and Rescue,” have likewise disappeared from the budget. The government pledged merit-based recruitment, digital transformation, and performance monitoring; instead, the budget expands temporary hiring, the most entrenched instrument of political patronage, and assigns no funding to digitization or restructuring. The judiciary—promised independence and efficiency—receives no allocations for court automation, prison rehabilitation, or investigations into financial crimes. Parliament can correct this by reinstating a modest, ring-fenced envelope for administrative renewal: conducting vacancy audits, supporting service digitization, and empowering the Civil Service Board to make merit-based appointments. Supporting the judiciary requires similarly modest steps, beginning with restoring minimal operational funding and dedicating resources to automation and backlog reduction. These are small costs with disproportionate institutional benefits.

Oversight bodies, which could anchor credibility and constrain misuse of public resources, also remain structurally underfunded. The Court of Accounts, Central Inspection, and the Central Administration of Statistics all operate with budgets too small to meet even basic functions. Reactivating CAS and funding a national inventory of public assets and liabilities would be inexpensive but transformative, allowing budgeting to rest on evidence rather than improvisation. Parliament can easily restore these lines and require that their outputs—reports, audits, and data—be published as a condition of funding. Strengthening oversight is not an optional reform; it is the prerequisite for any credible execution of the budget itself.

The structure of revenue administration reflects equally entrenched biases. Property and maritime domains remain undertaxed despite being among the country’s most visible, wealth-concentrated assets. After the collapse of the banking system, tracking movable capital has become more difficult, but that should make property taxation the anchor of progressivity. Real estate stores wealth, fuels speculation, and generate returns; yet property taxes remain flat and non-progressive, while maritime violations produce negligible revenue. Similarly, quarrying and environmentally destructive extraction—often concentrated among politically connected actors—continue without meaningful taxation despite their heavy social and ecological costs. Parliament can correct this by updating property valuation rolls, introducing higher bands for high-value properties, publishing a coastal asset registry, pricing concessions transparently, auctioning quarry permits, and imposing restoration bonds on environmentally damaging activities. These measures bring fairness to the tax structure while generating revenue without raising rates. They also underscore the urgency of advancing a national environmental policy that aligns taxation, regulation, and land-use planning, so that environmental resources are managed as public assets rather than exhausted as private windfalls.

Enforcement—the missing link between legislation and impact—remains weak. A state that cannot apply its own rules cannot rebuild a tax base. Parliament can strengthen enforcement without punitive measures by incentivizing small firms to re-enter formality and re-enroll workers in social insurance. Targeted relief, simplified compliance, and conditional amnesties tied to e-registration, e-invoicing, and NSSF enrollment can convert informal activity into stable revenue. VAT, the most regressive revenue instrument, can be partially offset through a narrow essentials basket or refundable VAT credits linked to national identifiers. Activating the Common Reporting Standard (Law 55/2016) would allow the state to identify Lebanese residents earning income abroad and collect the 10 percent tax on movable-capital income that currently escapes the net. And expanding Law 144/2019 to allow municipalities to identify unregistered activities—with a share of collected revenues as an incentive—would strengthen compliance where the state is weak.

Energy and infrastructure remain the backbone of any credible path to recovery, yet the budget sustains only a posture of maintenance. Electricity allocations do not move toward restoring public service; no financing is directed to revive oil and gas exploration; telecommunications modernization is absent; and regional development promises are reduced to symbolic lines. The consequences extend far beyond economic cost. A collapsed electricity sector has reshaped the hierarchy of authority in Lebanon: households pay generator owners promptly, not because the service is good or affordable, but because enforcement is immediate and personal. If a citizen delays payment, the generator operator arrives within hours and cuts the line—swift, direct, and punitive. By contrast, the state—unable to supply stable power, bill reliably, or enforce collection—cannot impose even a fraction of that authority. It is an inversion of sovereignty when citizens fear the reaction of a generator owner more than that of their own government.

This dynamic reveals why non-payment to the state is not moral failure but rational behavior in a system where the state delivers little and enforces even less. Parliament cannot close the enormous investment gap within a single fiscal cycle, but it can reorient the budget so that scarce capital expenditures target the minimal improvements that make state authority meaningful again. A state that provides nothing cannot enforce anything; improving electricity supply is therefore not only an economic priority but a precondition for restoring fiscal compliance, public trust, and the basic dignity associated with legitimate authority.

Across all these domains, a pattern emerges: even within fiscal constraint, choices exist. A credible reconstruction mechanism, empowered oversight bodies, an active statistics bureau, fairer property taxation, environmental levies, and a rehabilitated social-protection system would each have required small allocations but carried large meaning. Together, they would have signaled that the state is learning from its collapse rather than repeating it. Parliament now holds the responsibility—and the opportunity—to translate that recognition into action.

What Success Looks Like: Realistic Indicators Parliament Should Demand

In a system marked by institutional weakness and limited administrative capacity, success cannot be judged by dramatic transformations or ambitious structural targets. What Parliament can reasonably demand—within months, not years—are small but verifiable shifts that signal the beginning of institutional discipline, greater transparency, and fairer distribution. These indicators do not require new spending or complex reforms; they simply require the state to measure and disclose what it already does. In a low-trust environment, even modest improvements in reporting and execution can have an outsized impact on confidence.

A first set of indicators concerns distribution and tax fairness. While Parliament cannot overhaul the entire revenue system within a single budget cycle, it can monitor whether the share of revenue coming from progressive instruments increases even marginally, whether property-tax updates begin to take effect, and whether measures such as VAT credits or targeted support reduce the burden on the lowest-income groups. Such shifts, even if small in absolute terms, signal a break from the regressive architecture that has long defined fiscal policy.

Transparency and execution form a second pillar of realistic oversight. Parliament can require the publication of a version-differences table that tracks every adjustment made to the budget between drafts, as well as a fiscal risks statement outlining contingent liabilities in electricity, public health, social protection, and legal disputes. It can further demand monthly reporting on procurement that identifies the share of contracts allocated through competitive bidding. None of these steps depends on new institutions; they rely only on disclosure.

The health of the social-protection system provides a third area where Parliament can impose measurable expectations. The solvency ratios of NSSF branches, the evolution of arrears owed to the fund, and the average processing time for claims are all indicators that can be improved through administrative decisions rather than additional resources. Tracking and publishing these metrics would create the transparency needed to sustain any stabilization plan adopted for the NSSF.

Inflation anchoring is another area where success can be defined through rules rather than expenditure. Parliament can monitor the Central Bank’s net advances relative to the legal cap; track the volatility of the customs exchange rate under a predictable adjustment schedule; and oversee the composition of public-sector compensation to ensure that targeted lump-sum supplements—not broad indexation—are the primary tool for protecting purchasing power. These indicators help contain inflation expectations without imposing new fiscal commitments.

Together, these measures form a modest but achievable framework for evaluating whether the 2026 budget is moving the country toward greater credibility, fairness, and stability. Success in Lebanon today cannot be measured by large leaps; it is measured by whether institutions begin, however gradually, to do what they say they will do.

A Budget Cannot Create Reform, but It Can Signal Direction

Parliament now stands at a narrow but meaningful moment. The draft it has received is, in many respects, a procedural document—balanced on paper, structured in appearance, yet lacking the strategic clarity needed to guide the country through crisis. But a procedural budget can still be turned into a purposeful one. The window is limited, the margins tight, and the constraints real, yet Parliament retains the ability to shape the budget into a document that signals direction rather than simply registers obligations.

Lebanon does not need a perfect budget; perfection is neither possible nor credible in the current environment. What it needs is a budget that is honest in its assumptions, fair in its distribution, responsible in its priorities, and realistic in its commitments. A budget that does not promise what it cannot deliver and does not hide what it intends to avoid. A budget that begins to rebuild predictability for households, credibility for institutions, and a measure of stability for the economy.

The choices available today are not transformative, but they are consequential. Within the same fiscal envelope, Lebanon can choose differently—by grounding numbers in evidence, directing scarce funds toward genuine priorities, protecting what remains of its social safety net, and restoring the minimal oversight without which recovery becomes impossible. These steps are modest in cost but significant in meaning.

A better 2026 budget is possible now—not in theory, but in practice. The budget now rests with Parliament, which has both the mandate and the power to affect its outcomes.