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French Version

Azour releases official 2007 budget numbers, finds silver lining in cloud of red ink

Debt-to-gdp ratio has come down but remains in stratosphere

Finance Minister Jihad Azour confirmed on Wednesday that Lebanon's public debt remains a staggering $42.06 billion - or 171 percent of the country's gross domestic product (GDP) - despite the improvement of some indicators of fiscal performance.

The minister released the state's 2007 fiscal results to the media at the Grand Serial on Wednesday, and his presentation overflowed with mentions of how the Finance Ministry increased revenues, contained spending and brought the debt dynamic under control, despite his numbers showing that 2007's increase in GDP failed to keep pace with inflation and the state budget ran a deficit of more than $2.5 billion.

Azour cited the drop in the debt-to-GDP ratio to 171 percent from 178 percent at the end of 2006, and he noted that the state had achieved a primary surplus of LL1.1 trillion, the highest level in 15 years, both figures that economists praised when he released them last week in a separate debt report.

The ongoing political crisis significantly hindered the country's economic and fiscal health in 2007, as did inflationary pressure brought on by external factors such as the soaring price of oil and the weakening dollar, which made European exports more expensive, Azour said.

However, Azour's picture of rosy fiscal health in spite of these drags did not include details of how money pledged to Lebanon by donors at the January 2007 Paris III conference had impacted the bottom line, and many of the year-on-year increases touted in the presentation were skewed by the three months of 2006 when economic activity ground to a halt because of the devastating summer war with Israel.

In 2007 the state's revenues were LL8.74 trillion, with tax revenues comprising LL5.58 trillion of the figure. Income registered a 19.6-percent rise compared to 2006, Azour said.

Spending, meanwhile, topped out at LL12.59 trillion, of which debt service made up LL4.94 trillion - the largest chunk of the public sector's expenditures, he said. Expenditures rose 6 percent in comparison with 2006. The deficit of more than LL3.8 billion amounted to roughly 10 percent of GDP.

The state's coffers were also weighed down by LL1.48 billion to make up for the losses of Electricite du Liban (EDL). Azour pointed out the continually increasing burden that EDL placed on public finances, although the issue has a political dimension with much of the power utility's staff coming from the ranks of the opposition's Amal Movement.

The ministry also estimated that GDP growth for 2007 would come in between 2.5-3 percent, above the International Monetary Fund's prediction of 2 percent.

When rating agency Standard & Poor's last week Thursday lowered its long-term credit rating for Lebanon's state debt from a B- to CCC+, it did so not as a reflection of the state's fiscal performance but rather based on feuding political factions' inability to elect a president two months into a vacuum atop the executive, Azour said in his remarks to the assembled media.

Beirut 07-02-2008
The Daily Star

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