Hariri says accelerating reforms to rein in public debt

BEIRUT: Lebanese Prime Minister Saad Al Hariri said his government would aim to cut the budget deficit to 7% of GDP next year as part of reforms to bring public finances under control and rein in public debt.

Lebanon also plans to keep the local currency peg to the dollar which was crucial to move ahead with long-stalled reforms, Hariri told CNBC in an interview.

Lebanon faces another credit rating down grade and a potential test of its currency peg if the depletion of its limited foreign exchange reserves accelerates, S&P Global warned on Wednesday.

Hariri said the challenge was to prevent a further deterioration in Lebanon’s public debt burden, which is one of the heaviest in the world at around 150% of GDP. “Our strategy is to stabilise the problem that we have. Most important thing is not to deteriorate more, right?” he said.

With Lebanon suffering from years of low economic growth, long-stalled reforms are seen as more pressing than ever to put the state finances on a sustainable path.

On Monday, Lebanon declared a “state of economic emergency,” with Hariri saying the government would take emergency measures to speed up economic reforms to help overcome a worsening crisis.

Hariri said ater a gathering of senior politicians and ministers that accelerating reforms would avoid a scenario similar to Greece, which fell into a debt crisis nine years ago and had to adopt tough austerity measures under tight supervision by foreign creditors.

Economists and politicians say the big budget deficits over the years have been rooted in waste, corruption, and sectarian politics.

“So what we are doing is, fixing our debt to GDP, our deficit and the budget to 7.6% this year, we want to go down to 7% next year, or maybe a litle bit less,” he said in the interview aired on Wednesday.

The IMF said in July the deficit in 2019 would likely be well above the government’s target of 7.6% of national output.

Fitch downgraded Lebanon’s credit rating to CCC on debt-servicing concerns last month.