None of the growth plans elaborated since 1993 and then on a regular basis, was conducted as decided. This does not mean that the situation remained stagnant during many years. However, we couldn’t reach the projected growth rates, which was possible or probable for a country that witnessed a long war history and that needs to be reconstructed.
Shortly after war, an Arab and International Fund for Reconstruction was expected. However, following the conflict in the Gulf (after the Kuwait was invaded by Iraq) and other political data, this fund was not created.
Instead of this, generally low-interest credits were granted by Arab and International Development Funds as well as by foreign countries.
However, the major expenses and deficits of the government were financed by local bank credits, in Lebanese Pounds and in US dollars, at high interest rates that were even sometimes exorbitant. These expenses covered the reconstruction of the infrastructure, as well as current installments having a political aspect. This led to a high dose of corruption, and a takeover of public establishments and administrations, etc.
This political situation, which can be described as deleterious, was coupled with repetitive Israeli attacks following the Hezbollah operations in 1993, 1996, 1999… until the war of July 2006. This aggravated the business climate and decreased growth possibilities.
The debt has thus become one of the major concerns of the Government because it entered, in several periods, vicious circles. Debt servicing asphyxiated public finances and represented sometimes the whole revenues. The foreign currency debt (essentially in US Dollars) increased to reach currently more than half the gross public debt (21 billion dollars in addition to the 42 millions at the end of 2006).
The ratio «debt over GDP» is still increasing and reached the exorbitant level of 180%, a world record probably.
Normally, this situation should have led to a general financial crash as was the case in Turkey or Argentina. However, this catastrophic scenario did not happen mainly for the following reasons: the so-called foreign debt (i.e. in foreign currencies) was in fact at 75% internal because it is detained with local banks, the Central Bank and by individuals; the solid banking system was able to absorb the chocks and to constitute a security valve; the countries having close relations with Lebanon were able to make the financial activity breathe in the period of severe crisis, as was the case during the conference of Paris II in 2002, and Paris III in 2007. The Central Bank preserved against all odds the status of the local currency (versus the dollar) even if this was costly; Foreign exchange for example reached 75% of banking deposits and decreased the risk of devaluation that was feared.
In the context of this hardly brilliant scheme, the GDP was still able to progress, even though slowly, between 1992 and 2006 reaching 22 billion dollars. GDP per person reached around USD 5 000, which places Lebanon in the category of medium to high revenue countries according to the nomenclature of the UN organization or in the 80th place among the nations in the world. Nonetheless, to refresh these data, it must be said that the living standard is yet inferior to 30% compared to the year 1975. Even countries such as Cyprus or Ireland which were even poorer than Lebanon, went far beyond this level.
In the macro economy context, our balance of trade which suffers from an annual chronic deficit of 5 to 6 billion dollars is compensated by transfers from foreign countries equivalent to 7 to 8 billion dollars per year, which explains why there is generally a surplus in the balance of payment. These transfers result from the Lebanese expatriates and from Lebanese companies that have subsidiaries in various countries, as well as from Arab capitals that are injected in the country due to tourism, sale of immovable, bank deposits or direct investments.
These data were mentioned in the reports of the Insee, the French organization that was in charge of reorganizing the figures of our national audit. The Insee highlighted, irrelevant of the GDP or the GDP/person, the Available National Revenue that takes into consideration these characteristics to realize the real value of the national “available” wealth for the residents.
Finally, the plan of the Government, which was presented during the conference of Paris III in January 2007, foresees a decrease in the ratio debt/GDP at 145% in 5 years. Among the recommended measures are: a recourse to grants and credits given by foreign countries, a progressive privatization of some sate-related activities (telecoms, electricity, etc.), and reforms aimed at decreasing the public spending and liberating the economy, as well as having a particular assistance in favor of the private sector. A total of 7.6 billion dollars was promised during this world conference… provided to conduct these reforms.
Active Power in the Public Sector
| Armed forces |
90 000 |
| Public education |
48 000 |
| Public administrations |
82 000 |
| Total |
220 000 |
