Lebanon to Cut Budget Deficit to 7 Percent of GDP Next Year

Published September 5th, 2019 - 10:14 GMT
keeping the Lebanese pound at 1,500" is the only stable way to proceed with the government's reforms
keeping the Lebanese pound at 1,500" is the only stable way to proceed with the government's reforms. (Shutterstock)
Highlights
Lebanon also plans to keep the local currency peg to the dollar which was crucial to move ahead with reforms

Lebanese Prime Minister Saad Hariri said his government would aim to cut the budget deficit to 7 percent of GDP next year as part of pledged reforms to rein in public debt.

{"preview_thumbnail":"https://cdn.flowplayer.com/6684a05f-6468-4ecd-87d5-a748773282a3/i/v-i-f…","video_id":"f7d9015a-9d54-4378-b62b-eb602c235947","player_id":"8ca46225-42a2-4245-9c20-7850ae937431","provider":"flowplayer","video":"Top 10 Women Leading Top Companies in Middle East"}

Lebanon also plans to keep the local currency peg to the dollar which was crucial to move ahead with reforms, Hariri told CNBC in an interview.

"So what we are doing is, fixing our debt to GDP, our deficit and the budget to 7.6 percent this year, we want to go down to 7 percent next year, or maybe a little bit less," he said in the interview aired on Wednesday.

The prime minister also said that "keeping the Lebanese pound at 1,500" is the only stable way to proceed with the government's reforms.

Recent economic developments have led for the first time in years for the US dollar to reach 1,560 Lebanese pounds on the black market, compared with the 1,500 that has been fixed since 1997.

Hariri told CNBC that Beirut would not consider an International Monetary Fund (IMF) program since it would leave market forces to decide the pricing of the country's currency.

"I think the IMF has certain criteria that we do not, especially when it comes to the Lebanese pound. This is something that we feel extremely sensitive about."

The IMF said in July the deficit in 2019 would likely be well above the government's target of 7.6 percent of national output.

Lebanon has one of the world's highest public debts at 150% of GDP.

On Monday, Lebanon declared a "state of economic emergency", with Hariri saying the government would take emergency measures to speed up economic reforms to help overcome a worsening economic crisis.

President Michel Aoun also said that everyone should make "sacrifices,” raising concerns that more taxes will be imposed. 

No official details about the expected measures have been made public but economists said they included raising tax on gasoline, boosting the value added tax from 11 percent to 15 percent on luxury items, as well as fighting tax evasion. 

Fitch downgraded Lebanon's credit rating to CCC on debt-servicing concerns 10 days ago.


Copyright © Saudi Research and Publishing Co. All rights reserved.

You may also like