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Hariri Says Lebanon Targets Deficit of 7% of GDP Next Year

Hariri Says Lebanon Targets Deficit of 7% of GDP Next Year

Wednesday, 4 September, 2019 - 07:00
FILE PHOTO: Lebanese Prime Minister Saad Hariri is seen during a meeting at the governmental palace in Beirut, Lebanon February 6, 2019. REUTERS/Aziz Taher/File Photo

Lebanese Prime Minister Saad Hariri said his government would aim to cut the budget deficit to 7 percent of GDP next year as part of reforms seeking to rein in public debt, and pledged to keep the national currency pegged to the dollar.

"So what we are doing is, fixing our debt to GDP, our deficit and the budget to 7.6 percent this year, we want to go down to 7 percent next year, or maybe a little bit less," he said in an interview with CNBC aired on Wednesday.

"Keeping the Lebanese pound at 1,500" is the only stable way to proceed with the government's reforms, he told his interviewer.

Recent economic developments have led for the first time in years for the US dollar to reach 1,560 Lebanese pounds on the black market, compared with the 1,500 that has been fixed since 1997.

Hariri told CNBC that Beirut would not consider an International Monetary Fund (IMF) program since it would leave market forces to decide the pricing of the country's currency.

"I think the IMF has certain criteria that we do not, especially when it comes to the Lebanese pound. This is something that we feel extremely sensitive about."

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

Lebanon has one of the world's highest public debts at 150% of GDP.

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 economic crisis.

President Michel Aoun also said that everyone should make "sacrifices,” raising concerns that more taxes will be imposed.

No official details about the expected measures have been made public but economists said they included raising tax on gasoline, boosting the value added tax from 11 percent to 15 percent on luxury items, as well as fighting tax evasion.

Fitch downgraded Lebanon's credit rating to CCC on debt-servicing concerns 10 days ago.

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