Dr Azar is Professor of Finance and Economics at Haigazian University, Beirut, Lebanon. The views expressed in the note are strictly his and do not necessarily reflect the views of Blominvest Bank.
The question we would like to address is whether fiscal policy in Lebanon, since 1991, was sustainable with the benefit of hindsight. If this is the case the decision to default may have been hurried. Sustainability means the absence of a Ponzi scheme. In objective terms, sustainability requires that the present value of terminal debt is zero as the horizon, or the maturity number of years of the bond, tends to infinity.
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In hindsight – was the Lebanese sovereign default inevitable