Capturing the state: A political economy of Lebanon's public debt crisis 1992-2004

In 1993, the year the government of Prime Minister Rafiq Hariri, launched its post-war reconstruction program financed by domestic borrowing, Lebanon's public debt stood at LL 6,650 billion ($3.6 billion) equivalent to 50 percent of GOP. Of this, only 8.5 percent was foreign currency denominated. By 2004, the debt stood at LL 52,540 billion ($34.8 billion), equivalent to 185 percent of GOP, one of the highest public debt-to-GDP ratios in the world. The foreign currency component of this debt now represented 52.7 percent of the total, making Lebanon more vulnerable to a debt crisis as those witnessed in Latin American in the 1980s, which had forced these countries into structural adjustment. The same year World Bank Vice President Fran~ois Bourguignon warned that Lebanon's situation was "totally unsustainable," and pressed the government to make progress on structural reforms and privatization. 1 For the first time in its modem history, Lebanon - one of the economic success stories of the Middle East before the 1975 - 1990 civil war - was on the verge of a full blown debt crisis and increasingly at the mercy of its foreign creditors and the Bretton Woods institutions.