The Electricité du Liban (EDL) continues to drain state finances for over 25 years, bypassing all existing laws and offering Lebanese citizens and successive governments a choice between total darkness or more treasury loans. The latest instance was on January 18, 2023, when the caretaker government approved a loan of $62 million for EDL to import fuel and $54 million for the maintenance and operation of the Zahrani and Deir Ammar plants.
These loans join a list of loans that are against the law, which stipulates that no department or institution incapable of repaying the loan or debt should be given further loans. The Court of Accounts indicated in a 2021 report that 70% of the loans approved by successive governments were allocated to EDL, amounting to nearly 10 trillion unpaid loans by 2019. This is in addition to the $24 billion highlighted in audits conducted by the Court of Accounts, a significant amount that has since lost its purchasing power amidst the ongoing collapse of the national currency.
The report prepared by the fourth chamber of the Court of Accounts, chaired by Nelly Abi Younes, stated that "the treasury loans given from 1995 to the end of 2018, and that the unpaid loans balance until 2018 reached, according to the annual report of the Central Accountant for 2018, 7,991,092,786,458 L.L. This situation portends serious consequences for public finances," pointing out that EDL received the largest share of unpaid amounts, which reached 69.72% by the end of 2018, followed by the Higher Relief Commission at 12.27%, and the Council for Development and Reconstruction at 8.15%.
The Court did not stop there but made several recommendations, including "ceasing to give treasury loans to negligent bodies until they repay their dues," and "requesting the Treasury Directorate and other relevant departments to address any issues that might hinder the process of pursuing treasury loan repayments within the specified timelines and to take the necessary measures promptly."
### Off-Budget Calculations
The Court considered in its statistical study that "the non-repayment of treasury loans changes their original nature as special off-budget accounts with temporary debit characteristics to become final expenditure accounts, thus altering the final outcome of the fiscal cycle and the accumulated deficit transferred from previous years. This will be reflected in the data prepared subsequently based on the audit results of the treasury loans granted from 1995 to 2018, showing the status of treasury loan accounts at the end of 2018, then displaying the cumulative status of unpaid loans granted to public administrations and institutions accordingly."
The report clarified that the legislator confined the permission for granting treasury loans according to the provisions of Article 203 of the Public Accounting Law to specified cases for specific exclusively purposes: 1) to supply public administrations with common materials between more than one administration; 2) to purchase storable materials intended for use in the current or following fiscal year; 3) to fund public institutions and municipalities as well as independent funds established by law.
It became evident that the amounts granted under certain decrees and decisions did not fall within the objectives that the law authorized lending for, including providing treasury loans to cover public expenses.
### An Exceptional Period
In 2010, due to increased expenditures compared to 2005 and the government’s need to spend beyond what the 12th rule allowed, the cabinet agreed to take treasury loans that would later be covered by the approval of Parliament. Thus, during 2011 and 2012, several decrees were issued concerning the granting of treasury loans to public administrations and institutions to cover expenditures exceeding the allocated credits in the Law of the 2005 budget, which amounted to 8,900 billion L.L.
Among these was Decree No. 7566 dated 22/2/2012 granting the Ministry of Energy and Water a treasury loan of 22.5 billion L.L. to support imported red diesel at 3,000 L.L. per 20 liters for one month, and Decree No. 7840 dated 23/3/2012 providing the Ministry of Energy and Water a treasury loan of 5 billion L.L. to cover liquid fuel expenses for the General Directorate of Oil.
The report indicated that the decrees and decisions previously mentioned included provisions stating that the mere usage by the borrowing entity of any part of the loan is considered an acknowledgment of its repayment capability and that the borrowing entity must allocate the necessary credits in its budget to repay the loan within the specified period, with interest calculated at a rate exceeding two and a half points higher than the average annual interest on treasury bonds.
### Unpaid Loans
Additionally, the report highlighted that "what was included in the decision regarding the assumption that the borrowing entity's utilization of the loan constitutes a confirmation of its repayment capability and its commitment to reserve the necessary credits for repayment in its budget within the specified deadlines was not sufficient to ascertain the borrowing entity's ability to repay the loans in cash within the set timeframe, as none of the loan amounts were repaid, and their balances became a deficit in the institution’s budget, resulting in a hidden debt borne by successive public budgets through what they allocated for contributions to cover EDL's accumulated deficit."
The Court concluded its report noting a "significant shortcoming by the authorities assigned to pursue the repayment of these loans (Finance Minister, Central Accountant, etc.), as a considerable portion has remained unpaid for decades, which is fundamentally a debt owed by the borrowing entity to the state under normal circumstances. However, given the current economic conditions and the inability of most of these institutions to repay their outstanding balances, these loans will negatively impact state finances and increase the accumulated deficit in the budget in a non-transparent manner."
Despite all that has been reported indicating that the loans are essentially bad debts, EDL continues to finance fuel purchases through loans, "with the promise 'please believe' that it will repay them this time."
### A 50% Increase
At the end of 2017, the treasury loan account balance stood at 5,297,914,902,952 L.L. while at the end of 2018, it reached 7,991,092,786,458 L.L., showing a difference of 2,693,177,883,506 L.L., a nearly 50% increase attributed largely to EDL, which received a treasury loan of 2,712,188,691,506.00 L.L. in 2018 that remained unpaid by the year's end.
