Lebanon's economy will grow by 1.3 percent in 2001, snapping a two-year streak of zero or negative economic growth, according to an International Monetary Fund (IMF) draft report obtained Saturday, july 21, by AFP. The report also forecast another year of zero inflation for the country, but decried the recent state of national Lebanese finances.
"The IMF believes that real (gross domestic product - GDP) growth will hit 1.3 percent in 2001 and that inflation will stay even or zero," said the document, prepared here by IMF officials during the first two weeks of July.
However, it forecast a 2001 budget deficit of 22.8 percent of GDP, and a rise in gross public debt from 153 percent ($25 billion) of GDP from end-2000 to 176 percent of GDP by end-2001.
According to the IMF, Lebanon's "real GDP growth slowed over the last several years in the midst of greater budget deficits and increases in the ratio of the public debt (to GDP) to an exceptional level."
"This situation made the country very vulnerable to a loss, indeed a simple erosion, of confidence," it added. It said the "rate of increase of bank deposits has diminished regularly to the point where commercial banks no longer have the new resources to cover the financing needs of the government."
At the end of June, the central bank held foreign currency reserves of $234 million, and $1.1 billion in Arab funds, which are special deposits made by Saudi Arabia, Kuwait and Qatar to help Lebanon defend its currency.
Lebanon's economic growth was minus 0.1 percent in 1999 and zero in 2000. Having attained double digit figures at the start of Lebanon's reconstruction following the country's 15-year civil war (1975 -1990), Lebanon's GDP nosedived. By 1995 it was down to seven percent, dropping to four percent in 1996, 3.5 percent in 1997 and one percent in 1998.
The IMF described the government's strategy for a return to health by developing the private sector and privatization, which is expected to raise $2.7 billion. That would be followed by a surplus budget in 2002 with the help of a value new value added tax (VAT) and an increase in other taxes to total 25 percent of GDP, up from a current 18 percent.
The national debt would also be lowered with privatization revenues. However, the IMF was critical of the government's cancellation of contracts with two mobile telephone firms, France Telecom subsidiary Cellis and LibanCell, three years before they were due to expire. "This cancellation was a source of worry and could provoke delays" in the sale of the licenses, it said.
The IMF prepared its draft report with information provided by Lebanese financial and monetary authorities. The organization, however, signaled "a lack of reliable statistics" in Lebanon. "These estimates largely reflect the vision of the Lebanese authorities ... and it's their decision to decide if (their fiscal plans) form a realistic strategy," adds the report.
The IMF, which made a joint statement with the government on July 12 giving good marks to government development projects, has no mandate to intervene in Lebanon's financial crisis, or supervise a restructuring of shaky finances.
According to the report, the government expects GDP growth of 2.5 percent in 2002, four percent in 2003, and 4.5 percent for the years 2004-06. Inflation is expected to jump to five percent in 2002, fall the next year to two percent, to 1.5 percent in 2004, 2.5 percent in 2005 and 1.5 percent in 2006.
It anticipates a policy of "extreme austerity" and said the Lebanese banking sector will then be able to finance its foreign currency needs estimated at $11 billion between now and 2006. ― (AFP, Beirut)
© Agence France Presse 2001
© 2001 Mena Report (www.menareport.com)
