Comments on: The Onerous Cost of The Sovereign Debt In Lebanon http://www.yalibnan.com/2010/05/22/the-onerous-cost-of-the-sovereign-debt-in-lebanon/ World News Live from Lebanon Fri, 10 Feb 2012 05:43:00 +0000 http://wordpress.org/?v=2.9.2 hourly 1 By: ghassan http://www.yalibnan.com/2010/05/22/the-onerous-cost-of-the-sovereign-debt-in-lebanon/#comment-31893 ghassan Wed, 11 Aug 2010 11:53:22 +0000 http://www.yalibnan.com/?p=8952#comment-31893 Lebanon's sovereign debt/default could cost us our liberty.. e.g Egypt lost it to britain, Newfoundland to canada in 1936, lebanon will never pay its debt... the big question is To whom are we going to lose our liberty???? Lebanon’s sovereign debt/default could cost us our liberty..
e.g Egypt lost it to britain,
Newfoundland to canada in 1936,
lebanon will never pay its debt…
the big question is To whom are we going to lose our liberty????

]]> By: Bachir http://www.yalibnan.com/2010/05/22/the-onerous-cost-of-the-sovereign-debt-in-lebanon/#comment-11965 Bachir Wed, 26 May 2010 20:55:22 +0000 http://www.yalibnan.com/?p=8952#comment-11965 And what drives me crazy is the new wave of ignorance started by George Bush about " Democracy", and how all countries need to be democratic. Lebanon is not a democracy, for Greece to be " more democratic then Lebanon" as Ghassan stated in a reply. In a democracy , the majority rules. That means if 51% of the population voted so, they could jail or kill the other 49%. Lebanon, and most so called " democratic nations" are REPUBLICS AND NOT DEMOCRACIES. And what drives me crazy is the new wave of ignorance started by George Bush about ” Democracy”, and how all countries need to be democratic.

Lebanon is not a democracy, for Greece to be ” more democratic then Lebanon” as Ghassan stated in a reply.

In a democracy , the majority rules. That means if 51% of the population voted so, they could jail or kill the other 49%.

Lebanon, and most so called ” democratic nations” are REPUBLICS AND NOT DEMOCRACIES.

]]> By: AM http://www.yalibnan.com/2010/05/22/the-onerous-cost-of-the-sovereign-debt-in-lebanon/#comment-11643 AM Mon, 24 May 2010 15:09:32 +0000 http://www.yalibnan.com/?p=8952#comment-11643 Mr. Ghassan, first of all don't reply if you think i'm wasting your time. I advise you to check that again cause that 40%(21 billion USD), though called foreign debt, is meant to mean in foreign currency (mostly USD)of which 85% are eurobonds. To make that easier BDL owns about 2.1 billion USD and BANK AUDI owns 1.5 billion USD of this so called "foreign debt". I hope you are convinced now. You are arguing about lebanese lacking economic literacy?? Take it easy on us please.. Mr. Ghassan,
first of all don’t reply if you think i’m wasting your time.

I advise you to check that again cause that 40%(21 billion USD), though called foreign debt, is meant to mean in foreign currency (mostly USD)of which 85% are eurobonds.
To make that easier BDL owns about 2.1 billion USD and BANK AUDI owns 1.5 billion USD of this so called “foreign debt”.
I hope you are convinced now.

You are arguing about lebanese lacking economic literacy?? Take it easy on us please..

]]> By: Ghassan Karam http://www.yalibnan.com/2010/05/22/the-onerous-cost-of-the-sovereign-debt-in-lebanon/#comment-11568 Ghassan Karam Sun, 23 May 2010 14:31:06 +0000 http://www.yalibnan.com/?p=8952#comment-11568 Sebouh, My easy answer is that the Greek society is much more democratic than we are in Lebanon. Citizens are not beholden to political feudal lords. With all their problems, they do hold the elected leaders to higher standards of accountability than we do; much higher. And then there is the issue of economic literacy. The average Lebanese does not have an understanding of the significantly important macro economic ideas that govern economic welfare. We do not have a decent measure of inflation, we lack a measure of unemployment, we do not know who owns what (distribution of income), very few understand the difference between real and nominal...My point is that people cannot react to what they do not understand. Blame the media, politicians and educational institutions for this . As for corruption, itis so endemic that we do not recognize it. It is no longer that there is corruption in the system ; it is that corruption is the system. Lebanon is often classified as one of the most corrupt in the world. Sebouh,
My easy answer is that the Greek society is much more democratic than we are in Lebanon. Citizens are not beholden to political feudal lords. With all their problems, they do hold the elected leaders to higher standards of accountability than we do; much higher. And then there is the issue of economic literacy. The average Lebanese does not have an understanding of the significantly important macro economic ideas that govern economic welfare. We do not have a decent measure of inflation, we lack a measure of unemployment, we do not know who owns what (distribution of income), very few understand the difference between real and nominal…My point is that people cannot react to what they do not understand. Blame the media, politicians and educational institutions for this .

As for corruption, itis so endemic that we do not recognize it. It is no longer that there is corruption in the system ; it is that corruption is the system. Lebanon is often classified as one of the most corrupt in the world.

]]> By: Sebouh Akharjalian http://www.yalibnan.com/2010/05/22/the-onerous-cost-of-the-sovereign-debt-in-lebanon/#comment-11556 Sebouh Akharjalian Sun, 23 May 2010 10:22:47 +0000 http://www.yalibnan.com/?p=8952#comment-11556 Mr.Karam, True, the Lebanese budget is by far more austere then Greece or any other country respectively. The question that boggles my mind is that the Lebanese people are still not consciously aware or not interested to know about the contents of this budget plan that will most likely come against their interests. Unlike in Greece, people have wholeharteddly joined forces against their government plans. Why is that the case? Mr.Karam,
True, the Lebanese budget is by far more austere then Greece or any other country respectively.

The question that boggles my mind is that the Lebanese people are still not consciously aware or not interested to know about the contents of this budget plan that will most likely come against their interests.
Unlike in Greece, people have wholeharteddly joined forces against their government plans.

Why is that the case?

]]> By: Ghassan Karam http://www.yalibnan.com/2010/05/22/the-onerous-cost-of-the-sovereign-debt-in-lebanon/#comment-11555 Ghassan Karam Sun, 23 May 2010 10:18:35 +0000 http://www.yalibnan.com/?p=8952#comment-11555 AM, Usually I would not respond to each comment :-) but since this is such a major issue then I have no choice but to inform you that the data of the Lebanese Ministry of Finance contradicts strongly your aalegation that 60% of the foreign denominated bonds are owned by the Lebanese banks. The ministry of Finance records show that 40% of the national debt is owned by Foreign institutions. Where are these "recent financials that show that Lebanon is on "a" right track but not "the " right track?" How can paying 40% of the annual budget on debt service be sustainable? Each years growth in GDP is offset by the required new borrowings . In order to pay the debt service Lebanon must use every single $ at its disposal and so nothing is left for badly needed expenditures in education, healthcare, power generation, roads etc... AM,
Usually I would not respond to each comment :-) but since this is such a major issue then I have no choice but to inform you that the data of the Lebanese Ministry of Finance contradicts strongly your aalegation that 60% of the foreign denominated bonds are owned by the Lebanese banks. The ministry of Finance records show that 40% of the national debt is owned by Foreign institutions.

Where are these “recent financials that show that Lebanon is on “a” right track but not “the ” right track?”

How can paying 40% of the annual budget on debt service be sustainable? Each years growth in GDP is offset by the required new borrowings . In order to pay the debt service Lebanon must use every single $ at its disposal and so nothing is left for badly needed expenditures in education, healthcare, power generation, roads etc…

]]> By: AM http://www.yalibnan.com/2010/05/22/the-onerous-cost-of-the-sovereign-debt-in-lebanon/#comment-11553 AM Sun, 23 May 2010 09:13:21 +0000 http://www.yalibnan.com/?p=8952#comment-11553 Ghassan, I agree that 40% of debt in dollars is not peanuts at all. But I insist that these are eurobonds where 60% of them are held by lebanese banks. So they are internal debt though in foreign currencies. So all in all I think that about 85% of debt is internal held by lebanese banks and BDL and thus indirectly by lebanese people. As for the debt service and debt to gdp ratios I fully agree that they are major issues however I think debt is sustainable for the time being cause it is internal just as Japan. And my conclusion is based on recent financials which show that we are on "a" right track though not "the" right track. Ghassan,
I agree that 40% of debt in dollars is not peanuts at all. But I insist that these are eurobonds where 60% of them are held by lebanese banks. So they are internal debt though in foreign currencies. So all in all I think that about 85% of debt is internal held by lebanese banks and BDL and thus indirectly by lebanese people.

As for the debt service and debt to gdp ratios I fully agree that they are major issues however I think debt is sustainable for the time being cause it is internal just as Japan.
And my conclusion is based on recent financials which show that we are on “a” right track though not “the” right track.

]]> By: Ghassan Karam http://www.yalibnan.com/2010/05/22/the-onerous-cost-of-the-sovereign-debt-in-lebanon/#comment-11497 Ghassan Karam Sat, 22 May 2010 14:35:31 +0000 http://www.yalibnan.com/?p=8952#comment-11497 AM, It is important to use the correct data when discussing Macro aggregates. As of 2009 40% of the Lebanese sovereign debt was denominated in foreign currency, USD being the dominant one. So as you can see , technically you are right that most of the debt is internally held but 40% is not exactly peanuts. As to the comparisons to Japan and others, again it is not only the Debt?GDP that counts but it is the ability to service the debt that is the issue. Lebanon is currently allocating close to 40% of the budget to debt service. That is probably one of the highest if not the highest such proportion in the world. By contrast the US has less than 7% of its budget allocated to debt service. To put the same issue in different terms, Lebanese debt service /GDP is over 10% while debtservice/GDP in the US is 1.4%. ( I used the data for the US since I do not have at the moment the exact figures for Japan). AM,
It is important to use the correct data when discussing Macro aggregates. As of 2009 40% of the Lebanese sovereign debt was denominated in foreign currency, USD being the dominant one. So as you can see , technically you are right that most of the debt is internally held but 40% is not exactly peanuts.

As to the comparisons to Japan and others, again it is not only the Debt?GDP that counts but it is the ability to service the debt that is the issue. Lebanon is currently allocating close to 40% of the budget to debt service. That is probably one of the highest if not the highest such proportion in the world. By contrast the US has less than 7% of its budget allocated to debt service. To put the same issue in different terms, Lebanese debt service /GDP is over 10% while debtservice/GDP in the US is 1.4%. ( I used the data for the US since I do not have at the moment the exact figures for Japan).

]]> By: AM http://www.yalibnan.com/2010/05/22/the-onerous-cost-of-the-sovereign-debt-in-lebanon/#comment-11494 AM Sat, 22 May 2010 13:07:50 +0000 http://www.yalibnan.com/?p=8952#comment-11494 I agree on much of the terms above, however ghassan's solution of sov. debt thru defaulting isn't the solution in lebanon cause the debt is mostly internal. Interest rates will speed up and capital outflows will affect us. So doing restructurig indirectly, as the gov is trying to do, through pressuring banks to either buy t-bills with minimal interest rates or through their help in electricity partnersip is much better.... Through this we will keep our sovreign rating fixed and our CDS within limits. Our debt is ofcourse our biggest problem nowadays but it is nothing compared to the greek problem. Look at Japan who has a 200% debt to gdp ratio and mostly internal as ours and is doing wonders. I agree on much of the terms above, however ghassan’s solution of sov. debt thru defaulting isn’t the solution in lebanon cause the debt is mostly internal. Interest rates will speed up and capital outflows will affect us.
So doing restructurig indirectly, as the gov is trying to do, through pressuring banks to either buy t-bills with minimal interest rates or through their help in electricity partnersip is much better…. Through this we will keep our sovreign rating fixed and our CDS within limits.

Our debt is ofcourse our biggest problem nowadays but it is nothing compared to the greek problem. Look at Japan who has a 200% debt to gdp ratio and mostly internal as ours and is doing wonders.

]]> By: Ghassan Karam http://www.yalibnan.com/2010/05/22/the-onerous-cost-of-the-sovereign-debt-in-lebanon/#comment-11485 Ghassan Karam Sat, 22 May 2010 11:48:17 +0000 http://www.yalibnan.com/?p=8952#comment-11485 Sebouh, The Lebanese budget is more austere than any in Greece or any other country although it shouldn't be. The Greek government borrowed , to a large extent, in order to finance social expenditures that it could not afford and so it makes some sense to cut back on these expenditures that were beyond its reach in the first place. Lebanon, on the other hand, borrowed and squandered the funds on expenditures that did not benefit most of the people that are being asked to pay the price. If Lebanon is to avoid a debt crisis , which is debatable, then my quick back of the envelope projections , based on the proposed 2013 figures would be the following: 2020 GDP.......$55-57 billion 2020 Debt......$75-80 billion Debt Service...$5.5-6 billion Expenditures...$16 billion Revenue........$12 billion Deficit........$4 billion Exp.- DebtServ $10 billion i.e an increase of less than 5% from the level projected for 2011!!!! Sebouh,
The Lebanese budget is more austere than any in Greece or any other country although it shouldn’t be. The Greek government borrowed , to a large extent, in order to finance social expenditures that it could not afford and so it makes some sense to cut back on these expenditures that were beyond its reach in the first place. Lebanon, on the other hand, borrowed and squandered the funds on expenditures that did not benefit most of the people that are being asked to pay the price.

If Lebanon is to avoid a debt crisis , which is debatable, then my quick back of the envelope projections , based on the proposed 2013 figures would be the following:
2020 GDP…….$55-57 billion
2020 Debt……$75-80 billion
Debt Service…$5.5-6 billion
Expenditures…$16 billion
Revenue……..$12 billion
Deficit……..$4 billion

Exp.- DebtServ $10 billion i.e an increase of less than 5% from the level projected for 2011!!!!

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