Public debt to reach
$75 billion in 2016

Accelerated by a global recovery in interest rates

As fiscal deficit remains high, public debt is increasing at an annual average ranging between $4 billion to $5 billion, which will push it to $75 billion in 2016.

“Public debt is expected to reach this level with the continuous increase in spending,” said Former Finance Minister Jihad Azour. Total budget deficit reached $2.48 billion in 2014, up by 40 percent compared to 2013, according to the Ministry of Finance (MoF). Total expenditures rose to $12.2 billion in 2014, up by 15 percent. Total expenditures, according to this year’s budget are expected to reach $15.5 billion.

Azour said that “the burden of higher debt is felt on the economy through the debt service,” which is, by definition, the cash that is required for a particular time period to cover the repayment of interest and principal on a debt. “ The situation will be tougher with any hike in global interest rates,” he said.

In the recent past, high growth and low global interest rates have helped to lower the country’s debt burden, according to the IMF’s latest report, ‘Concluding Statement of the 2015 Article IV Mission’. But it warned that “global and domestic conditions will be less favorable in the foreseeable future, and without adjustment, public debt will continue to increase.” The report said that interest rates will inevitably rise along with global rates.

“There is no fear that the State will fall into default of its duties or fail to guarantee self-financing,” said Azour. The problem is that no effective action has been taken by the Government to reduce the deficit by limiting spending or by undertaking long awaited reforms in the telecom, electricity, infrastructure, and taxation sectors, among others, to increase revenues and support capital investments, according to Azour.