THE DEBT CONUNDRUM

SOLVING THE ISSUE OF THE PUBLIC DEBT IS OF PARAMOUNT IMPORTANCE IF ONE WANTS TO ADDRESS THE REST OF THE SOCIAL, ECONOMIC, INFRASTRUCTURE AND FINANCIAL ISSUES THAT BESET OUR COUNTRY

Below you will find some suggested solutions to that major issue.

1.- THE PROBLEM
We would like to draw the readers'attention to the fact that, according to our financial estimates for the next two decades, if we do not change course before the end of this year, our public debt is bound to increase exponentially during the next two decades, and is expected to reach $184 billion dollars by end 2032, even if we decide, and we are able to allocate $10 billion dollars every year to partially repay it out of our future oil and gas revenue, during the period from 2023 till 2032 (see figures 1 and 2 below).

Figure 1: The graph of the estimated growth of our Public Debt

Figure 2: The detailed estimates of the growth of the Public Debt

from 2014 to 2032 (the two scenarios: with and without reforms)

Figure 3: Notes to the readers

Figure 4: Some comments on the public accounts of 2013 and 2014

Figure 5: The impact of proposed fiscal reforms and improved public management on the reduction of the growth of our public Debt : US$72 billion in 20 years

.

Figure 6: The impact of a proposed reduction of 2% on the interest rates of the public Debt Bonds: US$110 billion dollars in 20 years

Figure 7: A suggested long term strategy for the Lebanese Government with a focus on achieving specific yearly objectives.

2.-THE FIRST PART OF THE SOLUTION - A reduction of 2% on the interest rate on the amount of the bonds. Expected savings in 20 years: US$114 billion dollars

The first and most important part of the solution consists in convincing the holders of the treasury bonds of our Public Debt to consent to reduce the interest rate on the amounts of these bonds by two per cent. We realize the complexity of such a demand, but, on the other hand, we do not see any other issue that would be susceptible to solve Lebanon's financial problems.

Such a reduction, if it is consented by the bondholders, would reduce Lebanon's debt burden by $115 billion dollars during the 20 years period from 2014 to 2032 (see figures 1, 2 and 6 above)

3.-THE SECOND PART OF THE SOLUTION - Introducing a number of basic reforms with the aim of maximixing public revenue and eliminating waste and misappropriation of public funds.Expected savings in 20 years: US$72 billion dollars

In figure five we show up that it is possible to save up to $72 billion dollars during the period 2014 to 2032, provided some essential reforms are introduced. Most of these savings will originate from four out of the seventy odd public budget accounts. These are: the "EDL management operations and the fuel consumption" accounts, the "Real Estate Registration fees" account, and the "foreign workers permit fees" account (see figure 4 and 5 above).

Note: the savings in fuel consumption can only be realized, once the two generating plants provided for in the Gebran Bassil Energy Policy of 2010 are built and operated. The first plant can be in operation by end 2015, provided construction starts almost immediately)

A short description of the reforms envisaged appears in figure five.

4.- CONCLUSIONS: In our considered opinion, the two categories of reforms: the reduction of 2% on the rate of interest on the debt and the proposed fiscal initiatives must go"hand in hand" and must be implemented at the same time.