30 April 2009
BEIRUT: The positive economic indicators prevailing in Lebanon after the eruption of the global financial crisis do not provide a guarantee for the future of the country with the presence of a public debt that is increasing year after year, president of the World Union of Arab Banks Joseph Torbey said Wednesday.
"Economic indicators in Lebanon have been positive after the eruption of the global financial crisis and we have witnessed a surplus in the balance of payments, an increase in banks' assets, an improvement in our exports and a boost in the tourism sector," said Torbey. But, he added, these positive trends should not be seen as a guarantee for the future of Lebanon because the country is in dire need for an all-inclusive work plan aimed at protecting the financial and monetary system.
These remarks came during the Business and Financial Forum held at Movenpick Hotel and Resort in Beirut and organized by Confex International.
The forum aims at presenting the implications of the economic crisis on the business sector and the financing opportunities through alternative financial sources.
The public debt, which now stands at $47.5 billion, is expected to reach more than $49 billion at the end of 2009.
Although successive governments managed to slightly reduce Lebanon's debt-to-GDP ratio thanks to the massive cash injections from Paris III donor countries, the country is still considered as having one of the highest debt-to-GDP ratios in the world.
The current government submitted a 2009 draft budget which does not contain any new taxes nor does it mention the privatization of the telecom, a key element in Paris III paper.
Economists fear that the public debt will pose a serious challenge to any new government, warning that the authorities need to reduce spending or increase revenues to check an increase in the debt.
"We can not face the public debt by continuously increasing taxes at a time when economic slowdown in Lebanon requires additional tax incentives for the creation of sustainable growth and job opportunities, which will increase investments and fix macroeconomic problems," he added.
Torbey believes securing political stability in Lebanon is a must because this will provide Lebanese banks and financial institutions with a special and high rank among Arab and international financial institutions.
Former Prime Minister Najib Mikati said that Lebanon's resilience did not mean the Lebanese economy was immune to the crisis, and this was reflected by the availability of two contradictory sectors in the country which are the private and public sectors. "The private sector is a very successful one trying to constantly improve its performance in spite of all the difficulties and challenges it faces," he said. Meanwhile, he added, the public sector is inflated and negatively affecting economic growth in the country at a time when it should be supporting the private sector.
Mikati stressed on the necessity to work on improving the public sector so that it becomes an added value to the Lebanese economy and not a burden that would cause economic slowdown and social repercussions. "It is very necessary to restructure the various ministries in Lebanon for them to be able to cope with future challenges. A specialized body should be created to deal with the public debt and improve economic policies as well as enhance the role of supervisory associations," he said.
Mikati added that it was very important to work on attracting skilled Lebanese living abroad in addition to focusing on sectors in which Lebanon can excel such as Information Technology. He added that it was important for the coming government to differentiate between the political, economic and social problems in its attempts to address them so security and political stability prevail in the country.
Copyright The Daily Star 2009.
