The fiscal crisis in Lebanon. (c1993)

Abstract

Before the eruption of the civil war in 1975, the Lebanese economy was one of the healthiest and most developed as compared to other developing and even some developed economies, with important industrial, agriculture, financial, and services sectors. Lebanon occupied an important cultural, financial, and industrial position in the Middle East. Government involvement in economic affairs was minimal, and free enterprise reigned supreme. Economic growth was accompanied by relative price-level and financial stability, a strong national currency, and a considerable inflow of capital due to relative political stability in the country. However, since 1975, the civil war has been main determinant on the country's economic and social life. The economy has been experiencing a drastic decline in real output, investment, and the exchange value of the Lebanese Pound, coupled by massive fiscal deficits, ever-increasing public debt, rapid and variable inflation, and a shift away from the Lebanese Pound to foreign currencies. The worsening of economic and political conditions in the country has led to severe worsening of the social conditions: Lebanon now has entered a state of poverty among low and middle-income groups. In fact, the fiscal crisis has been a permanent aspect accompanying economic activity in Lebanon since 1975, which implied and still implying adverse consequences on the economy. The present purpose of this thesis is to investigate the fiscal process in Lebanon during the 1975- 1992 period: it's roots (causes ) , consequences on both the economic and social levels, as well as suggesting some policy measures to halt it . This thesis is composed of an analytical part and an empirical part. The first part deals with the causes and consequences of the fiscal crisis in the Lebanese economy and some recommendations to halt this phenomenon. The second part provides empirical investigation of the major sources of the fiscal crisis in Lebanon. More precisely, the thesis is composed of five chapters. The first chapter presents an historical account of the state of public finance, during the 1964-1974 period. The second chapter presents a historical account of the fiscal crisis in Lebanon during the 1975-1992 period and its causes. The third chapter clarifies the policy measures undertaken by domestic authorities to cease the burden of the fiscal crisis. The fourth chapter exhibits the major consequences of the fiscal crisis in Lebanon, both on theoretical and empirical levels. Finally, the last chapter gives the conclusion of this thesis as well as some policy measures that could help in halting the phenomenon of fiscal crisis in Lebanon.