1 / 32

Fiscal implications of the July war were extremely high due to both direct and indirect cost

Lebanese Economic Association Conference January 15, 2007 From Paris II to Paris III: Some Facts on Public Finances, Debt, and the Economy Presentation by BankMed Chief Economist Dr. Mazen M. Soueid.

kuri
Download Presentation

Fiscal implications of the July war were extremely high due to both direct and indirect cost

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Lebanese Economic Association Conference January 15, 2007From Paris II to Paris III: Some Facts on Public Finances, Debt, and the EconomyPresentation by BankMed Chief Economist Dr. Mazen M. Soueid

  2. Back to power in 2000 on the back of a slowing economy, the government of late PM Hariri developed an ambitious economic reform agendaIn that context, Paris II was a mean of extensive financial support as well as a framework for the implementation of the long-awaited reforms

  3. The economy posted, as a result, strong GDP growth rates in 2003 and 2004, particularly in the later year, when growth reached 7%

  4. Revenue collection was boosted, and expenditures increase curbedFiscal Balance improved as a result

  5. But strong political divisions did not allow the privatization program, one of the main pillars of the reform agenda, to be implementedAs a result, the stock of debt (more dependent on privatization proceeds than on fiscal balance), and hence the debt to GDP level decreased only slightly

  6. Political earthquake in 2005- Assassination of PM HaririBig impact on financial but smaller impact on public financesMilitary earthquake in 2006- July Israeli warSmall impact on financial but much bigger impact on public finances

  7. Fiscal implications of the July war were extremely high due to both direct and indirect cost

  8. The indirect effects are much higher: Higher funding cost, at least for international market debt Lost revenue from lost economic activity Expenditures are up The deficit is higher and the primary surplus is lower

  9. And this has undermined efforts since late 2000 to reduce the deficit and to increase the primary surplus……Which increased further the debt levels, and the already high and spiralling debt-to-GDP ratio

  10. What about 2007? Biggest challenge will be to fill the gross financing need of the government (estimated at around $10 billion) without a further increase in interest rates

  11. And these are only part of large amortization obligations coming due in between 2007 and 2010 putting total gross financing need (amortization obligations plus fiscal deficits) at about $37 billion in the next three years……which in the absence of reforms will place a higher burden on the domestic commercial banks, keep interest rates high, and crowd-out the private sector

  12. It is in this sense, that a successful Paris III is no longer a luxury, but an imperative doorway to tackling the structural debt issue and lay down the foundations for Lebanon to reach potential growth rates of 7-8% as manifested in the first half of 2006

  13. Thank You

More Related