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French Version


Banque Audi warns of further borrowing (Daily Star)

Report warns measures must be taken to fund cost of public debt

Banque Audi warned in its third -quarter economic report that Lebanon may be compelled to borrow more money to finance the cost of the public debt if fiscal adjustment measures are not taken in the near future.

But Audi, which is one of the biggest banks in Lebanon, did not see any immediate threat to economic and financial stability.

“Given the currently reinforced market resilience and the significant gains that resulted from “Paris II,” failure to move forward with adjustment measures would not pose an immediate threat to economic and financial stability,” Audi said in its report.

However, the report said that if the state proves unable to introduce structural adjustment measures at this stage, Lebanon will have little prospect of reducing the deficit in the fiscal account in the medium-term.

The government of Prime Minister Rafik Hariri pledged to reduce its borrowing if privatization and fiscal adjustment measures were taken in 2003. But none of these measures materialized last year due to the rift between Hariri and President Emile Lahoud over the necessary measures to reduce the $32 billion public debt. Audi also expressed some concern over the lack of measures in the 2004 draft budget, which is yet to be approved by Parliament.

The analysis of the 2004 budget figures shows a public finance deficit (budget and treasury) ratio of 32.5 percent of expenditures, against 26.9 percent in the 2003 budget. The 2004 public finance deficit ratio exhibits a mild improvement, from the 35 percent-38 percent bracket, which was supposed to be realized in 2003.

The public finance deficit substantially exceeded the budgeted figures in 2003, after two years of relative alignment of realized figures with preset targets. “The 2004 budget is based on a ‘significant’ increase in public expenditures (around 8 percent) from the 2003 figure, to be coupled with a rise in revenues of 8.9 percent. The rise in expenditure is mainly driven by an increase in capital expenditure and social spending, within the context of a drop in debt servicing.”

Audi feel that the current political climate in the country is not conducive to growth. Caught in the debilitating power struggle among top politicians, economic policy making is continuing to lose momentum.

Economists and financial analysts fear that the chances of reducing the deficit this year maybe lost after the government failed to launch its first auction and tender of the cellular networks last month.

Beirut 26-01-2004
Osama Habib
The Daily Star



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