Lebanon Sees Public Debt At $58bln To $59bln End 2011

Lebanon Sees Public Debt At $58bln To $59bln End 2011

Lebanon's public debt is expected to rise to between $58 billion and $59 billion by the end of 2011, Finance Minister Mohammed Safadi said on Friday, compared with $52.6 billion at mid-year.

November 26, 2011 11:37 by Reuters

Safadi’s estimate, given to reporters at a banking conference in Beirut, was slightly lower than the $60 billion prediction he gave one month ago. He did not give a reason for the change in the figure.

Lebanon’s debt-to-GDP ratio, projected in Safadi’s draft 2012 budget to fall to 132 percent from 135 percent this year, is one of the world’s highest, partly due to reconstruction costs from its 1975-1990 civil war.

Despite sharply lower economic growth this year of around 2 percent, the government plans to increase budget spending by 15 percent in 2012, saying it will keep debt under control by increasing value-added tax and other revenue-raising measures.

The International Monetary Fund’s mission chief to Lebanon called this week for a “prudent” 2012 budget in which fiscal policies target a small primary surplus and keep the debt-to-GDP ratio on a downward path.

“We have a prudent budget,” Safadi said. “But we are in need of a lot of expenditure. That’s why they are calling our budget expansionary, but it is not. They are expenditures we need to do.”

The minister repeated a commitment not to increase the budget deficit, either in absolute terms or as a factor of GDP.

“We are committed to these two things irrespective of the size of our expenditures.”

In a statement following annual consultations with Lebanon’s government, the IMF said on Wednesday economic activity in Lebanon was showing signs of a pick-up and could reach 3 to 4 percent in 2012, from 1 to 2 percent this year.

But it said risks were “high and to the downside”, due to global economic uncertainty and regional unrest, particularly in neighbouring Syria, where the army is trying to crush an eight-month uprising against President Bashar al-Assad.

“We are taking it into consideration,” Safadi said of the unrest. “But we need to invest in our infrastructure. That is a must.”

By Erika Solomon

(writing by Dominic Evans; Editing by Catherine Evans)