$2 billion shortfall rings alarm
Balance of payments goes into deficit
The Balance of Payments (BoP) posted a substantial deficit of $2 billion in 2011, the biggest since 2002. The BoP had posted a surplus of $3.3 billion in 2010.
According to former Minister of Finance Jihad Azour, the BoP deficit trails the overall economic output of the year, which he dubbed as “below satisfactory.”
Azour said that the BoP deficit was triggered by a deficit in the balance of trade, spurred by higher imports, as well as an insufficient capital flow which failed to offset the shortage.
The Balance of Payments, which mirrors net foreign assets in the country, posted surpluses of $7.9 billion in 2009 and $3.5 billion in 2008.
The 2011 deficit was triggered by a surplus of $2.3 billion in the Central Bank's net foreign assets and a deficit of $4.3 billion in those of banks and financial institutions.
The BoP recorded a deficit of over $2.68 billion up to the month of November. In December 2011, the BoP was in surplus of around $691million which partially offset the shortage. The December surplus was driven by a $612 million surplus in the net foreign assets of banks and financial institutions, and a surplus of around $80 million in those of the Central Bank.
According to Azour, the BoP deficit, along with other indicators of the economic slowdown, should mean a “call for action” for decision makers. He said that the Ministry of Finance needs to formulate a solid plan to preserve financial and economic stability in the country.
According to Azour, the 2012 budget draft lacks realistic reasoning. He said that though the Minister of Finance said that he intends to maintain the budget deficit at its current rate, the draft budget includes additional expenditures which are not compensated by an adequate increase in revenue.
The Minister of Finance Mohamad Safadi recently said that the wage increase will cost the government around $933 million. However, Safadi reassured that the 2012 deficit would not exceed $3.48 billion despite the planned increase of investments in infrastructure.
Azour said that while it is difficult to forecast the 2012 outlook of the BoP, addressing the payments’ deficit is one of the critical concerns which the government must address throughout the year. “The 2012 economy faces major challenges and the government doesn’t seem to be addressing them,” he said.
Date Posted: Feb 08, 2012