A leading Lebanese banker fears a Greek economic scenario in Lebanon this year if the government fails to take immediate action to reduce the budget deficit, cut waste and implement broad reforms.
“If the debt continues to rise in the same high tempo then I won’t be surprised if Lebanon experiences the same scenario in Greece, whose economy is in total shambles,” Francois Bassil, Chairman of Byblos Bank, one the three largest banks in the country, told The Daily Star in an exclusive interview Thursday.
Bassil reiterated that Lebanese banks are not willing to lend the government more money if Prime Minister Najib Mikati and his ministers fail to adopt crucial measures to cut the size of the public debt, which has reached alarming levels.
Lebanese banks have been financing most of the public debt since late former Prime Minister Rafik Hariri embarked on a bold drive to rebuild the country.
The Central Bank of Lebanon and local banks hold most of the debt, which is expected to reach $60 billion at the end of 2012 through subscriptions to treasury bills and sovereign eurobonds.
Bassil made it clear that Lebanese banks will roll over the outstanding debts each year, but have no intention or desire to increase their exposure to this debt.
Mikati has so far been unable to implement a number of the reforms that he promised because of sharp political divisions between ministers.
Finance Minister Mohammad Safadi presented the 2012 draft budget to the Cabinet for approval last month, but several ministers, mainly from the Change and Reform bloc, knocked the bill down the moment it became public.
Safadi had proposed raising the Value Added Tax to 12 percent from 10 percent, and raising the tax on interest rates on customer deposits to 7 percent from the current 5 percent.