Lebanon's public debt rises to $29 billion

The Lebanese Central Bank said today (August 21, 2002) that Lebanon's public debt rose to 43.7 trillion Lebanese pounds (US $28.97 billion) by the end of June 2002 up from $28.8 billion a month earlier.

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By  Massoud Derhally Published  August 21, 2002

The Lebanese Central Bank said today (August 21, 2002) that Lebanon's public debt rose to 43.7 trillion Lebanese pounds (US $28.97 billion) by the end of June 2002 up from $28.8 billion a month earlier.

The bank's monthly bulletin said public debt registered a year-on-year growth rate of 16.18 by the end of June, compared to 16.74% at the end of May. External public debt was $11.5 billion, or 39.9% of the total, by end-June.

Lebanon’s fiscal problems and growing debt burden prompted some recently to speculate that the Middle East may face a similar scenario to that of Argentina.

The country went on spending spree in the construction era immediately after the end of a 15-year civil war (1975-1990) piling up a government debt that accounts for 178% of gross domestic product (GDP), the highest of any rated sovereign.

In March 2002, the Lebanese government issued a US $1 billion Eurobond to swap local bonds into cheaper external debt.

The move is supposed to help the government’s debt servicing costs but the difference in value between the two is not great compared with the scale of the debt burden.

Analysts point out that that the rise in debt has also placed pressure on the country’s currency.

In a sovereign rating report (May 2002), Fitch IBCA, an international rating agency, said that Lebanon’s current policy mix of targeting the nominal exchange rate as well as nominal interest rates in the context of falling foreign exchange reserves and rising government debt as unlikely to be sustainable.

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