Donours ‘sceptical’ of Lebanon’s economic progress: envoy

A French diplomat representing donors who pledged billions in funding to Lebanon last year said on Thursday there was rising “scepticism” of the country’s financial progress, and stressed the “urgency” of the situation, reports BSS/AFP.

Lebanon has promised donors to slash public spending as part of reforms to unlock over $11 billion (10 billion euros) in aid and low-interest loans pledged at a conference dubbed CEDRE held in Paris in April 2018.

On Thursday, French diplomat Pierre Duquesne said international donors are still willing to provide funding to bolster Lebanon’s ailing economy.

“It is true that their (donors’) scepticism has risen in recent weeks… but they remain ready to help as long as things are progressing well on the Lebanese side,” he told a press conference capping his days-long visit.

“It is certain there is a great urgency, that is something everyone agrees on, because there is not a single economic indicator that is not negative,” he added.

To reduce the budget deficit, “the bulk of efforts must focus on (public) spending,” he said.

He also called for tax hikes. On Monday, Lebanese authorities declared an “economic emergency” after a meeting at the presidential palace in Baabda.

Prime Minister Saad Hariri pledged “swift measures” to stabilise public finances, the state-run National News Agency said after the session. “We need to accelerate work on the CEDRE agreement,” he told reporters.

He also stressed “the need to maintain the stability of the exchange rate of the Lebanese pound” against the dollar.

Growth in Lebanon has plummeted in the wake of repeated political deadlocks in recent years, compounded by the 2011 outbreak of civil war in neighbouring Syria.

Lebanon’s public debt stands at around $86 billion — higher than 150 percent of GDP — according to the finance ministry.

Eighty percent of that debt is owed to Lebanon’s central bank and local banks.

Last month, Fitch bumped Lebanon down to “CCC” in a move that “reflects intensifying pressure on Lebanon’s financing model”, the credit rating agency said.

Standard & Poor’s kept Lebanon’s “B-/B” rating, but said it could still lower ratings over the next year if banking system deposits and the central bank’s foreign exchange reserves continue to fall.

In July, parliament passed the 2019 budget, which is expected to trim Lebanon’s deficit to 7.59 percent of GDP — a nearly 4-point drop from the previous year.