This study traces back Lebanon’s public debt levels, debt composition and the incurred costs of debt to infer the main cycle that has driven the country to its current downturn. Since September 2018, Lebanon’s indices on the fixed income and stock markets hit unprecedented lows which unveiled the urgency of immediate fiscal reforms and the need to lift up economic growth.
Lebanon’s limited fiscal space and, in fact, the government’s narrow maneuvering space absent fiscal policy and the now-limited monetary policy options, exposes the risks of government financing, debt sustainability, as well as the scale of fiscal adjustments needed. Furthermore, the inter-linkage between the government’s debt and the financial sector balance sheets has emerged to the forefront. A closer look also reveals the absence of prudent spending policies, which engendered historical fiscal vulnerabilities and fueled macroeconomic imbalances.
For the full report, please follow the link: A Historical Analysis of Lebanon’s Public Debt