Le­banese PM warns of eco­nomic col­lapse amid po­lit­i­cal cri­sis

The Pak Banker - - BUSINESS -

Le­banese Prime Min­is­ter Tam­mam Salam said the gov­ern­ment may be un­able to pay wages next month amid a po­lit­i­cal cri­sis that has left the coun­try with­out a pres­i­dent or a func­tion­ing par­lia­ment.

The im­passe may also pre­vent the gov­ern­ment from selling bonds, af­fect­ing the coun­try's credit rat­ing, Salam told a news con­fer­ence in Beirut on Sun­day, a day af­ter dozens were wounded when a protest against grow­ing piles of garbage turned vi­o­lent.

"The garbage cri­sis is what broke the camel's back, but the story is much big­ger than this," Salam said. "Did you know that be­cause of the fail­ure to take de­ci­sions, we may not be able to pay the salaries of a large num­ber of public sec­tor em­ploy­ees?" The in­abil­ity to ser­vice the public debt through bond sales could push Le­banon's rat­ing down to the ranks of the "failed states," Salam said. Le­banon is rated B- at Stan­dard & Poor's, six lev­els be­low in­vest­ment grade.

Be­set by do­mes­tic sec­tar­ian crises and re­gional proxy con­flicts, Le­banon has been with­out a head of state since Pres­i­dent Michel Suleiman's term ex­pired in May 2014, be­cause law­mak­ers can't agree on a suc­ces­sor. Par­lia­ment hasn't con­vened in months and squab­bles be­tween sup­port­ers of re­gional Sunni and Shi­ite pow­ers Saudi Ara­bia and Iran have im­peded the cab­i­net's de­ci­sion-mak­ing.

A Le­banese of­fi­cial, speak­ing on con­di­tion of anonymity, told Bloomberg last week that the coun­try plans to tap in­ter­na­tional debt mar­kets to raise $1.3 bil­lion this year. Author­i­ties will ap­proach banks over the is­suance next month, the of­fi­cial said.

Salam spoke af­ter at least 75 protesters were wounded in Satur­day's clashes with se­cu­rity forces in cen­tral Beirut, ac­cord­ing to the Daily Star news­pa­per. The in­te­rior min­istry said more than 30 po­lice­men were hurt.

Garbage has been piling up in Beirut since July 17, when the main land­fill for Le­banon's cap­i­tal was closed be­fore of­fi­cials had agreed on an al­ter­na­tive site. The garbage was re­moved from Beirut two weeks later but kept in­creas­ing in other ar­eas of Le­banon as the cab­i­net dead­locked over the is­sue.

Mo­hamed Abu Basha, an economist at Cairo-based in­vest­ment bank EFG-Her­mes, said politi­cians might reach a com­pro­mise to re­solve the coun­try's im­me­di­ate eco­nomic cri­sis, "which has been the equa­tion gov­ern­ing the coun­try for a few years now." "But a long-term res­o­lu­tion seems un­likely be­fore the more im­por­tant con­flict is re­solved one way or another, namely Syria," he said by e-mail.

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