The ratings on the Republic of Lebanon (B/Negative/B) will remain under downward pressure until there is a fiscal correction that is substantial enough to reverse the growth in the public debt burden, International ratings agency Standard & Poor's (S&P's) warned.
"Fiscal deficits remain too high and have led to the rapid accumulation of debt and pressure on the exchange rate peg," said S&P's credit analyst Navaid Farooq. "If the government is to rehabilitate its finances, measures must be taken this year."
Government debt has accumulated rapidly in the past five years, reaching 171 percent of Gross Domestic Product (GDP) in 2001. In spite of fiscal imprudence and increasing dollarization, the Banque du Liban, the country's central bank, has so far been able to maintain the Lebanese pound's peg to the US dollar.
"Barring any unforeseen events, rating changes will hinge on the government's ability to reduce the fiscal deficit and secure financing," Farooq emphasized. "Key items that will be monitored closely are the performance of Value Added Tax (VAT), further expenditure cuts, privatizations, balance-of-payment pressures, and regional geopolitical developments." — (menareport.com)
© 2002 Mena Report (www.menareport.com)
