Lebanon Hopes to Raise Billions to Boost Stalling Growth

Lebanon is hoping to raise billions of dollars at a France-led donor meeting on Friday to stave off an economic crisis in the world’s third most indebted country.

Growth in the small Mediterranean country has plummeted in the wake of repeated political crises, compounded by the 2011 breakout of civil war in neighboring Syria, AFP reported.

The Syrian war has sent one million Syrian refugees in flight to Lebanon, a country of only four million before the conflict.

The Paris conference comes as Lebanon gears up for its first general elections in almost a decade in May, after parliament renewed its own mandate three times since 2009.

The Middle Eastern country hopes donor countries and financial institutions at the CEDRE conference will help stimulate the economy through investment.

Lebanon hopes to raise “between $6 billion and $7 billion in the shape of credit facilities and funds,” Nadim Munla, an adviser to Prime Minister Saad Hariri, has said.

Parliament last week adopted a 2018 government budget, projecting a deficit of $4.8 billion—more than double the deficit in 2011, when Syria’s war started.

Economist Paul Doueihy says this growing budget shortfall means “the probability of a systemic crisis is now higher than ever”. To avoid bankruptcy, the state should “urgently” reduce its spending, he and others say.

Debt: The slip in state finances has propelled public debt to $80.4 billion, as of late January. That was almost double the debt of $40.7 billion before a donor conference was last held for Lebanon in 2007, and a further increase from $52.6 billion before the conflict broke out.

Public debt was equivalent to 150% of gross domestic product at the end of 2017—the third highest worldwide after Japan and Greece, according to the IMF. That was up from 131% of the GDP in 2012. It is expected to reach around 180% in five years’ time, the IMF says.

The total assets of the banking sector, one of the major pillars of the local economy, stood at $222 billion in January—equivalent to four times the country’s GDP.

Commercial deficit: Lebanon depends largely on imports and suffers from a chronic commercial deficit. According to figures from customs, this shortfall reached $20.3 billion in 2017, in a 29% increase from the previous year. The balance of payments stood at a negative $156 million.

That was better than a record deficit of $3.4 billion in 2015, but far from a positive balance of payments of $3.3 billion in 2010 before the Syrian war.

Unemployment: Unemployment doubled between 2011 and 2014, when 20% of Lebanese were jobless, the IMF says.

And the number of people living in extreme poverty rose by 66% between 2011 an 2015, according to the charity Oxfam.

Corruption: In 2016, more than 92% of Lebanon’s population saw worsening corruption, graft watchdog Transparency International said. In its last report, the watchdog ranked Lebanon 143 out of 180 countries it surveyed for its perceived corruption index.