Coll 54/2 'Middle East (Official) Committee: Working Party' [‎45r] (89/642)

of the change from ca buyers to a sellers market and over
stocking by merchants imports are being automatically
reduced. In the meantime the Government has made a
beginning with the to some extent alternative policy of
encouraging exports, e.g # the commercial agreements with Italy,
Prance, and the Yemen. The decision in September, 1949
not to devalue the Lebanese and Syrian currencies is however
bound to increase the difficulties facing Lebanese exporters#
The establishment of an important money market in Beirut
has also been encouraged by the legalisation in the Autumn
of 1948 of the-free market in foreign exchange. This latter
development was considered undesirable from the point of
view of British exchange control as it resulted in an
irregular dollar sterling cross rate but there is little
doubt^ that the operation of the market contributes towards
bridging the Lebanese deficit in her balance of payments#
According to the Societe Libanaise d^conomie politique the
deficit in the Lebanese balance of payments (as opposed to
that of the Lebanoso-Syrian Customs Union) amounted in 1946
to about £L 134.5M half of which was the result of trade with
Syria, and during the war years the deficit amounted to
a total of £L415M. High prices of Syrian agricultural
products particularly cereals - in 1946 the Lebanon is
estimated to have imported BL100M worth of goods from Syria,
including cereals to the value of £L 5 CM — wore largely
responsible# It is emphasised however in the Societal
report that those estimates are necessarily approximate and
it is doubtful whether in the calculations sufficient
allowance is made for the very large profits made on foreign
imported goods re-exported by the Lebanon to Syria during
the war and immediately afterwards# Furthermore owing to
the abnormally high price of Syrian cereals these figures
cannot be taken as a reliable guide for the future#
(5) Budgetary Position.
The State budget has increased ton-fold since 1939#
Receipts have regularly shown a surplus over expenditure
until 1948-9 when military expenditure and refugee relief
necessitated additional appropriations in addition to exhausting
the reserve fund. Indirect taxation provides 83 >& of the
revenue. In 1946 Estimates less than £L 15M was allocated to
productive expenditure out of the total of £L 38 - public
works £L 11#4 M education £L 1M, public health £L 2M,
agriculture £L# 6 M. The balance amounting to £L 43 M Is
divided to cover salaries and various administrative expenses#
Taxation