Lebanon: Stopping the vicious economic circle
Bank of Beirut and the Arab Countries SAL (BBAC) considered in its third quarter economic report that the improvement in economic activity during this past summer might put an end to the recession if this progress is sustained. However, the overall deterioration in public finances has negatively affected the economic situation, which, in turn, is worsening the fiscal performance.
The report warned about the need to stop this vicious circle by taking drastic measures such as supporting the economy’s productive sectors, sharply reducing public debt and rationalizing public revenues and expenditures. According to BBAC, the administrative reforms aimed at reducing public expenditures have not materialized, while the fiscal adjustment that was supposed to improve revenues has progressed only in theory.
BBAC indicated that privatizing state-owned assets is the only way for a sharp and rapid reduction of the public debt. It noted that net public debt reached 135 percent of GDP, about twice the average debt-to-GDP ratio of emerging markets. It indicated that the Lebanese pound came under pressure in the past few months, but the high level of foreign reserves at the Central Bank and the liquidity of the banking sector helped monetary authorities to maintain the stability of the currency. — (Lebanon Invest)