Home  Business Presidential struggle poses new threat to economy |
|
Presidential struggle poses new threat to economy |
|
|
Written by Daily Star
|
Two-government scenario could be very costly
The economic recession, a sharp drop in capital inflow and an unsettling political future are raising serious questions about Lebanon's ability to deal with the prospects of two rival governments if the presidential polls are not held on time. With less than eight days before the scheduled presidential elections at the deeply divided Parliament, most economic indicators have fallen sharply in the first six months of 2007, reflecting the negative mood of investors.
According to Central Bank figures, capital inflow, or remittances from expatriates as some prefer to call it, have seen a dramatic drop.
The capital inflow in the first six months of 2007 fell to $3.949 billion compared to $6.318 billion in the same period of 2006, a decrease of 37.5 percent.
It is worth mentioning that 2006 saw an Israeli war on Lebanon and a number of security incidents and yet capital inflow last year remained relatively high.
This drop in capital inflow has partly caused Lebanon's balance of payments to record an accumulated deficit in the first six months of $207 million after a recording a surplus of $166 million in the first five months of this year.
Furthermore, Consumer Lebanon and many civil societies warned that the high cost of living has reached alarming levels, claiming that the current government is not taking any measure to check the spiraling prices of commodities.
Some economists fear a worst-case scenario if the main rival political groups fail to name a president before October 24, the date when President Emile Lahoud is supposed to step down from office.
One leading economist, who spoke on condition of anonymity, said the country would slide into chaos if a second government is formed by Lahoud.
"The political and economic prospects in Lebanon are quite grim if the country [should be] split in half. Imagine if some of the outlets such as ports and airports fall in the hands of opposition groups. This means that the government would lose revenues," the economist warned.
He added that Central Bank Governor Riad Salameh would be in a difficult spot if two governments are formed.
"Salameh may be compelled to pay the salaries of two Cabinets as well as the salaries of two security forces if things reach a dead end," the economist said.
He also expressed fear that the government may not be able to sell new Treasury bills or Eurobonds if a second government is formed.
Salameh told participants in a conference in Paris last week that the Lebanese pound and interest rates would remain stable despite the deep political division in the country.
But he called on all politicians to settle their differences to spare the economy from any further pitfalls in the future.
Some international rating agencies cautioned the Lebanese government that the negative rating would remain on hold if serious measures are not taken to reduce the mounting public debt.
Standard & Poor's agency said in a statement last week that it would need to see serious commitment from Lebanon to cutting its debt before considering upgrading its rating.
The country is rated "B-" by the agency, six notches below investment grade, and S&P added a negative outlook after the war between Israel and Hizbullah guerrillas in Lebanon last year.
"We probably will not review it before the end of this year, we'll need to wait until
the first quarter of 2008," said Anouar Hassoune, a credit analyst at the agency.
Hassoune said an upgrade would depend on faster growth, political stability and a clear sign that Lebanon wants to reduce its public debt which stands at about 180 percent of gross domestic product.
In addition to the maturing bonds which the government must pay on time to maintain its credibility in the international markets, Lebanon will face other crucial problems such as who is going to finance the sustained deficit of both Electricite du Liban and the National Social Security Fund in case of a division in power.
Both of these departments are literally draining the government's dwindling resources.
Finance Minister Jihad Azour, who traveled to Portugal last week to attend the Euro-Mediterranean conference, said earlier that Lebanon has signed $3.4 billion worth of grants and loans since the end of Paris III donor conference.
Azour said that the Finance Ministry has increased the cash reserves in the event of worst-case scenario.
He told reporters that the ministry had managed to implement a series of reforms in spite of the situation.
But Azour and other officials sent a strong message to all concerned groups in Lebanon and abroad: "Any delay in reforms and privatization, irrespective of the reasons, will have a dire impact on the public debt, revenues and above all the economy."
By Osama Habib
Daily Star staff
http://www.dailystar.com.lb/article.asp?edition_id=1&categ_id=3&article_id=85353
|
|
|
Madness takes over Lebanon.
Militants are fighting in the streets of Beirut. Military guns are on both sides. What is the prospect of such a situation. Aren't the Lebanese fed-up with wars?
23 November 2007
Lebanese President Emile Lahoud left the Baabda presidential palace without handing over the power to a new president. This is the first time since independence in 1943. |
advertisements
|
