The Development Debates on Poverty in the Arab Region
5 Video-conferencing Sessions, March 5th - April 2nd, 2002, Beirut

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Session 2: Macro and Micro Economic Dimensions of Poverty

Tuesday March 12, 2002

Paper: Micro-Finance in Lebanon: Al-Majmou'a

Mr. Rida Maamari and Dr. Joey Ghaleb

National Debate

The national debate during the second session focused mainly on the public debt and the fiscal crisis that the Lebanese economy is currently witnessing.

The national discussion, gathering eminent economists, public officials, NGO leaders, private sector actors and researchers, revolved around those two pressing issues, stressing on the need to address the relation of public debt to the deflating average income level and the decline in purchasing power of the Lebanese. Alarming figures, such as the average family-spending deficit of 30%, were considered as a sign of an inflated private debt that ought to be accounted for in the overall evaluation of the economic crisis.

ome warnings were issued about the sectoral inter-dependency of internal debt and the domino effect that could occur in case one sector collapses. Some participants argued that such a deficit and inter-dependency should already have had a debilitating effect on the economy, if not for the presence of additional incomes such as Diaspora transfers, informal incomes, consumption of the family's business capital, etc… that are delaying the implosion.

Another major axis of discussion tackled the controversial issue of fixed parity between the Lebanese Pound and the Dollar, a policy that was pursued by both alternating governments during the 90s. Many argued that much of the public policies followed during the last decade were based on, and designed in support of this overarching objective. The discussants deplored this "politicized" strategy, putting forth the political and economic price that had to be paid in order to maintain it.

They finally conveyed the need for a public debate regarding the issue of maintaining fixed parity and a possible re-questioning of its validity and sustainability in light of the current economic situation.

Some participants put forth the growing deficit between imports and exports and incriminated fiscal policies that encouraged foreign investment in high interest treasury bills and speculative real estate and discouraged direct investment in the productive/industrial sector.

It was viewed by some that the structure of investment policies pursued after the Lebanese civil war lacked both an overall coherence and a clear inclusive strategy, and that foreign capital needed to be redirected towards the productive sectors; and that this strategy would have required imposing binding conditions and "risk" taxations on both foreign investment and the banking sector.

Furthermore, the discussants shed light on some preconceived ideas regarding the so-called "new trend" of liberalization and its potential benefits for the Lebanese economy. It was argued that Lebanon had a long tradition of liberal economic and fiscal policies, and that the current wave of privatization that is promoted to supposedly relieve the burden of public debt was very much in line with this tradition.

Some participants observed that Lebanon had indeed an extended experience in privatization and that the Lebanese economy was historically very much dependant on private investment. The private sector was the main actor in the national economy of Lebanon, and the current trends of globalization and liberalization have vindicated its prominent role.

It was seen, however, that in many cases the history of such a trend in Lebanon was not exclusively a success story, and that sectors such as education, for example, achieved their best improvement in periods when there was a strong and competent state-run sector.

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