Lebanon’s growing trade imbalance

Source: Nidaa El Watan

Lebanon’s total imports are expected to approach $20 billion by the end of the current year, pointing to a large trade deficit driven by the wide gap between imports and limited exports. While Lebanon imports most of its basic needs, its export capacity remains weak, entrenching a trade deficit that could exceed $15 billion.

This deficit does not appear directly in the balance of payments due to inflows of dollars from abroad, particularly through expatriate remittances, tourism revenues, and the cash-based economy. However, this balance remains superficial and fragile, as it is based on consumption financed from outside rather than domestic production.

This economic model poses a risk to financial stability in the event of any decline in these inflows, making support for productive sectors, control of imports, and the strengthening of exports an urgent necessity for any sustainable economic recovery path.

A chronic problem

In this context, economist and member of the executive bureau of Lebanon’s Economic, Social and Environmental Council, Anis Bou Diab, told Nidaa Al-Watan that “the phenomenon of a large trade deficit is not new; it is a historical condition in Lebanon. The lowest levels of the trade deficit were recorded in the 1970s, when Lebanon experienced a notable industrial boom and an increase in exports, particularly toward Kuwait in the late 1960s and early 1970s. During that period, the trade deficit did not exceed 20 to 25 percent, and exports covered between 70 and 75 percent of the value of imports.”

Bou Diab noted that “the situation today is completely different, reflecting the accumulation of trade deficits over the years. In 2022, imports amounted to around $16.5 billion. In 2023, they reached approximately $18 billion, while in 2024 they stood at about $17.3 billion.”

By contrast, exports amounted to roughly $4.5 billion in 2022, around $4 billion in 2023, and approximately $3.5 to $4 billion last year.

Where the imports really go

Bou Diab expects imports this year to reach about $20 billion, while exports are likely to fall below last year’s levels, which he estimates at around $3.7 billion. “Naturally, we need to work more seriously to increase our exports,” he said.

He then raised a key question: “But was all of this import volume actually destined for the local market?” He explained that at the end of last year and the beginning of this year, the former Syrian regime collapsed, a new authority emerged, and conditions gradually stabilized. Commercial movement began to reopen, and the impact of the Caesar Act and sanctions on Syria later eased, enabling exports from Lebanon to Syria.

He added that Syria was suffering from a fuel crisis at the beginning of the year, before it was resolved and fuel prices were liberalized, making prices in Syria higher than in Lebanon. As a result, a large portion of goods imported into Lebanon was re-exported or transferred to Syria, sometimes through smuggling, a phenomenon that still partially persists. Consequently, part of this year’s imports was not intended solely for the Lebanese market.

Bou Diab also pointed to a particularly active summer season starting in early July, which further increased import volumes. Accordingly, the trade deficit is expected to exceed $17 billion.

Why the trade deficit doesn’t ahow on paper

“Despite this large deficit,” Bou Diab said, “there is no deficit in the balance of payments.”

This raises the question: how can there be no balance of payments deficit when the trade deficit stands at around $16.3 billion ($20 billion in imports versus $3.7 billion in exports)?

Bou Diab explained that the balance is sustained by several key sources, foremost among them tourism revenues, which reached around $7 billion this year; expatriate remittances, estimated between $6 and $7 billion according to official figures, noting that additional transfers take place hand-to-hand or are carried in cash by travelers and therefore are not officially recorded; profits from external investment portfolios transferred back to Lebanon; and limited foreign investments, which he estimates at around $350 million this year.

All these resources cover the trade deficit, meaning that no deficit appears in the balance of payments, and in some cases a surplus may even be recorded.

Cheap goods, high costs

Regarding the advantages and drawbacks of increased imports, Bou Diab said the positives include the ease of securing goods for Lebanese consumers. All products are available in the local market, giving consumers broad freedom of choice and meeting most daily needs, a result of Lebanon’s open import policy.

Another advantage is Lebanon’s potential role as a trade platform. High import volumes could position Lebanon as a re-export hub to other countries, particularly with improving security conditions and the normalization of Lebanese Arab relations. Historically, Lebanon has played a key role in wholesale and retail trade and could benefit from this role again.

On the negative side, Bou Diab warned that increased imports create intense competition for domestic industry, threatening an already fragile national industrial sector. He stressed the need to protect and support industry to enhance its competitiveness locally and abroad.

Large import volumes also drain foreign currency, as importing nearly $20 billion annually means the same amount leaves the country. Without expatriate remittances, the balance of payments deficit would be massive, placing further pressure on the Lebanese pound and reducing purchasing power.

He also highlighted the high fuel import bill, noting that fuel accounts for around 30 percent of total imports, a major issue in itself. If Lebanon were to develop future oil resources or secure sustainable electricity, the import bill could drop by $1.5 to $2 billion, reflecting current consumption by private generators and industrial and service sectors.

The only way out: Produce more, export more

Bou Diab stressed the importance of strengthening production and exports, emphasizing the need to protect national industry and expand exports to correct the trade imbalance. According to the Ministry of Economy’s plan, exports could be increased from $3.5 billion to around $7 billion by 2030, a key step toward reducing the trade deficit and improving balance of payments performance.

He also noted that rising global prices of gold and silver have contributed to higher import bills. Lebanon imports and re-exports these metals, so any increase in their prices directly raises the overall import value. In addition, global price increases, especially in raw materials along with higher shipping and transport costs, have all contributed to higher import costs and a rising import bill overall.

Accordingly, addressing the structural imbalance in the trade balance remains a core priority for any sound economic recovery path, through supporting productive sectors, boosting exports, and controlling the import bill.