Net public debt rises six percent to $70 billion. Share of foreign debt is falling - Lebanon

Net public debt rises
six percent to $70 billion
Share of foreign debt is falling
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Net total debt, after deducting public sector deposits with the Central Bank (BDL) and commercial banks, increased by six percent to $69.3 billion. Gross public debt grew 6.2 percent in 2017 to reach $79.5 billion by the end of the year, according to data published by the Ministry of Finance (MoF).

The foreign portion of the debt increased by $2.3 billion to $30.4 billion. Domestic debt rose by $2.4 billion to $49.1 billion. The proportion of foreign debt as a percentage of total debt continues to fall. It dropped to 38 percent at the end of 2017 from 42 percent at the end of 2012 and 50 percent at the end of 2007.

The debt-to-GDP ratio was 148 percent at the end of 2016, according to the MoF. The International Monetary Fund (IMF) estimated that the debt had reached 150 percent of GDP at the end of 2017.

An IMF mission who recently visited Lebanon said in their 'Concluding Statement' that a comprehensive fiscal adjustment would significantly improve public debt ratios but it would not be without risks. In order to be effective, the fiscal adjustment must be accompanied by substantial structural reforms and/or an exchange rate adjustment, they said.

The fiscal deficit almost reached $5 billion in 2016. It narrowed 36 percent to $2 billion in the first nine months of 2017 driven by a 12 percent rise in revenues and a three percent drop in spending. The budget revenues realized last year included a tax of $775 million imposed on the banks’ one-off revenues derived from BDL’s financial engineering operations of 2016.

According to the IMF staff's statement, the proposed fiscal adjustments include hiking the rate of the value added tax (VAT), gradual elimination of electricity subsidies, and restoring gasoline excise and fuel taxes to their pre-2012 levels. “In addition, there is scope to contain personnel spending and undertake a civil service reform,” the IMF staff said.

The 'Concluding Statement' represents the opinion of the IMF staff, not necessarily that of the IMF's Executive Board. The IMF is scheduled to release another report following its board meeting in the second quarter of 2018.

Reported by Shikrallah Nakhoul
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Date Posted: Mar 01, 2018